Institutional Impediments

The rules and regulations framed by different national governments also hinder the process of globalization. Some of the types of rules and regulations that could be framed by governments to hinder the expansion of global corporations are given below:

• Tariffs and duties, which may limit the benefits achieved by economies of scale in production

• Quantitative quotas and other similar restrictions

• Preferential procurement from local organizations by government and quasi-government entities

• Governmental pressure to use locally produced components or to engage in local R&D

• Preferential tax treatment and labor policies      

• Corporate laws, tax laws, or other policies of the local government

These regulations are put in place to protect local organizations from global competition. They are framed keeping in mind a particular nation's interests with regard to employment, defense, and regional development. In most cases, the advantages of global competition outweigh the disadvantages. Therefore, organizations need to consider the trade-offs in globalization before entering new markets.

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