What is meant by the term "institutional framework"?

The term "institutional framework" refers to the combination of both formal and informal institutions that shape the behavior of individuals and firms within a particular context. This encompasses a wide range of influences, including legal systems, economic policies, cultural norms, and social practices. These elements work together to establish the rules, incentives, and constraints within which economic interactions occur.

In an institutional framework, formal institutions might include laws, regulations, and official policies that govern business conduct. Informal institutions, on the other hand, could involve social norms, customs, and unwritten rules that also play a crucial role in shaping how entities operate. Understanding this combination is vital for analyzing how different environments affect business strategies, organizational behavior, and economic outcomes.

The other options focus on narrower aspects of institutional influences. Practices within a single organization are too limited to capture the broader context of an institutional framework. A governing body for international organizations highlights an important component but does not encompass the variety of institutions at play. Lastly, legal regulations alone do not sufficiently represent the diverse factors—both formal and informal—that constitute an effective institutional framework.