No not really. You can install applications even on external drives if you want to. But there is a small caveat mind you.
Applications don't usually install themselves to a folder and be done with it. They usually add support files like dll's to other folders (Windows, System etc..) and make changes to the registry.
However the place of residence of the actual Program files, (executables, and other files) can be located anywhere you wish.
Most applications come with installers you can point to different locations where they can install.
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Ignorance is not necessarily Bliss, case in point:
Unknown has caused an Unknown Error on Unknown and must be shutdown to prevent damage to Unknown.