chapter 8 global business – Flashcards
Unlock all answers in this set
Unlock answersquestion
Which of the following is a home-country policy for limiting outward FDI?
answer
Manipulating tax rules to encourage the firms to invest at home
question
Offshore production refers to FDI undertaken:
answer
To serve the home market
question
Economists refer to "knowledge spillovers" that occur when companies in the same industry are located in the same area as:
answer
Externalities
question
The tendency to aggressively court FDI believed to be in the national interest of a country is an aspect of:
answer
Pragmatic nationalism
question
The strategic behavior theory:
answer
seeks to explain the patterns of FDI flows based on the idea that FDI flows are a reflection of strategic rivalry between firms in the global marketplace.
question
A firm is most likely to favor foreign direct investment over exporting when:
answer
the firm wishes to maintain control over its operations and business strategy.
question
The main benefits of inward FDI for a host country arise from:
answer
the resource-transfer effect, the employment effect, and the balance-of-payments effect.
question
The _____ of foreign direct investment refers to the amount of FDI undertaken over a given period (normally a year).
answer
flow
question
Foreign managers trained in the latest management techniques can often help to improve the efficiency of operations in the host country, whether those operations are acquired or greenfield developments. This benefit of FDI falls into the category of _____.
answer
resource transfer effects
question
Historically, most FDI has been directed at the FDI_____ nations of the world.
answer
developed
question
Mergers and acquisitions differ from greenfield investments in that:
answer
the percentage of mergers and acquisitions is lower than greenfield investments in developing nations.
question
Which of the following is the only way in which a current account deficit can be supported in the long run?
answer
selling assets to foreigners.
question
According to internalization theory, one of the drawbacks of licensing is that:
answer
it does not give a firm the tight control over manufacturing, marketing, and strategy in a foreign country that may be required to maximize its profitability.
question
According to the free market view, how does FDI increase the efficiency of world economy through MNEs?
answer
The MNE is an instrument for dispersing the production of goods and services to the most efficient locations around the globe
question
The viability of an exporting strategy is often constrained by transportation costs, particularly of products that have a _____ and that can be produced in almost any location.
answer
low value-to-weight ratio
question
The _____ view of FDI traces its roots to Marxist political and economic theory.
answer
radical
question
Which of the following is most likely to be the effect of FDI in the form of a greenfield investment on the host country?
answer
It drives down prices and increases the economic welfare of consumers.
question
Direct effects of FDI on employment in the host country arise when a foreign MNE:
answer
employs a number of host country citizens.
question
A firm that does not want to bear the costs of establishing production facilities in a foreign country should avoid:
answer
FDI
question
Which of the following statements is most likely to be true regarding the adverse effects of FDI on the host country?
answer
When a foreign subsidiary imports a substantial number of its inputs from abroad, it results in a debit on the current account of the host country's balance of payments.
question
People with radical view toward FDI argue that _____ is an instrument of imperialist domination.
answer
a multinational enterprise
question
The _____ states that combining location-specific assets or resource endowments and the firm's own unique assets often requires FDI and it also requires the firm to establish production facilities where those foreign assets or resource endowments are located.
answer
eclectic paradigm
question
The interdependence between firms in an oligopoly leads to _____.
answer
imitative behavior
question
The most important concerns regarding the costs of FDI for the home-country center on:
answer
the balance-of-payments and employment effects of outward FDI.
question
Which of the following is a major type of foreign investment risk that is insurable through government-backed programs?
answer
Risks of expropriation
question
According to internalization theory
answer
licensing may result in a firm's giving away valuable technological know-how to a potential foreign competitor.
question
multinational enterprise
answer
is an organization that owns or controls production of goods or services in one or more countries other than their home country.
question
greenfield investments
answer
establishing a new operation in a foreign country.
question
Flow of FDI
answer
The amount of direct investment into a country in a defined time period undertaken by foreign entities (FDI inflow), or the amount of direct investment into foreign countries made by entities resident in a country in a defined period of time (FDI outflow).
question
Stock of FDI
answer
The cumulative value of direct investments that have been made by foreign entities in a country at a given point in time.
question
Outflows of FDI
answer
Flow of foreign direct investment out of a country.
question
Inflows of FDI
answer
Flow of foreign direct investment into a country.
question
market imperfections
answer
imperfections in the operation of the market mechanism
question
oligopoly
answer
An industry composed of a limited number of large firms
question
Multipoint Competition
answer
Arises when two or more enterprises encounter each other indifferent regional markets, national markets, or industries.
question
Location-Specific Advantages
answer
Advantages that arise from using resource endowments or assets that are tied to a particular foreign location and that a firm finds valuable to combine with its own unique assets.
question
Balance-of-Payments Accounts
answer
nation accounts that track both payments to and receipts from foreigners
question
Current Account
answer
In the balance of payments, records transactions involving the export or import of goods and services
