The Role of Political Institutions and Actors in Business
1. INTRODUCTION:
The contemporary business world is global in character. The businesses have to operate in different environments and jurisdictions. In such a scenario, the political institutions and actors play an important role in the growth and development of businesses (Friedman, 1970). The political institutions are the formal and informal rules and regulations that govern the society. The political actors are the individuals and groups that participate in the political process. They can be either elected or unelected.
2. POLITICAL INSTITUTIONS AND BUSINESS:
2.1 The role of political institutions in business:
The political institutions create the framework within which businesses have to operate. They set the rules of the game. They establish the property rights and spell out the procedures for starting and operating a business. They also define the methods for resolving disputes between businesses and individuals. The political institutions also provide infrastructure facilities like roads, power, water, etc. which are essential for businesses. Furthermore, they also help in creating an environment conducive to economic growth and development.
2. 2 The impact of political institutions on business:
The political institutions have a direct impact on businesses through the rules and regulations that they formulate. The businesses have to comply with these rules and regulations. Non-compliance may lead to penalties and other legal consequences. The political institutions also have an indirect impact on businesses through their policies and programmes. For instance, the monetary and fiscal policies of the government can have an impact on businesses. An expansionary monetary policy will lead to lower interest rates and increased investment spending by businesses. This will stimulate economic growth. Similarly, an expansionary fiscal policy will lead to higher government expenditure on infrastructure projects which will provide a boost to businesses operating in those sectors.
3. POLITICAL ACTORS AND BUSINESS:
3.1 The role of political actors in business:
The political actors play an important role in promoting or hampering the growth of businesses through their actions and policies. They can either create an enabling environment for businesses or a hostile environment. The actions of the political actors can have a direct impact on businesses through legislation or regulation. For instance, the enactment of labour laws can have an impact on businesses operating in that jurisdiction. Similarly, the decisions taken by courts can also have an impact on businesses as they interpret and apply labour laws, taxation laws, etc.
3. 2 The impact of political actors on business:
The political actors can have a positive or negative impact on businesses depending upon their actions and policies. If they promote entrepreneurship and investment, then it will create an enabling environment for businesses leading to economic growth and development. On the other hand, if they pursue populist policies which hamper entrepreneurship and investment, then it will create a hostile environment for businesses leading to stagnation or even decline.
4. CONCLUSION:
To sum up, it can be said that the political institutions and actors play an important role in the growth and development of businesses. The businesses have to operate within the framework set by the political institutions. The actions of the political actors can have a direct or indirect impact on businesses. The political actors can either create an enabling environment for businesses or a hostile environment.