Question 1

Which of the following is a home-country policy aimed at limiting outward FDI flow?

Accepted Answer

A)   Taxing domestic companies' foreign earnings at a higher rate than their domestic earnings
B)   Implementation of government-backed insurance programs to cover major types of foreign investment risk
C)   Eliminating double taxation of foreign income
D)   Persuading host countries to relax their restrictions on inbound FDIE) B) and D)
F) A) and C)

Question 2

According to Knickerbocker's theory:

Accepted Answer

A)   when a firm has valuable know-how that cannot be adequately protected by a licensing contract it engages in FDI.
B)   when a firm's skills and know-how are not amenable to licensing, it usually prefers the FDI route.
C)   by placing tariffs on imported goods, governments indirectly increase the cost of exporting relative to foreign direct investment and licensing.
D)   when a firm that is part of an oligopolistic industry expands into a foreign market, other firms in the industry will be compelled to make similar investments.E) A) and B)
F) All of the above

Question 3

Countries adopting a pragmatic stance pursue policies designed to maximize the national benefits and minimize the national costs.

Accepted Answer

A) True 
 B)False

Question 4

What is a greenfield investment? How does it compare to an acquisition? Which form of FDI is a firm more likely choose? Explain your answer.

Accepted Answer

FDI can take the form of a greenfield in...

Question 5

What are location-specific advantages? How do they help explain FDI?

Accepted Answer

Location-specific advantages are advanta...

Question 6

What is multipoint competition? How do firms respond to multipoint competition?

Accepted Answer

Multipoint competition arises when two o...

Question 7

When a company brings capital and/or technology to a host country, the host country benefits from the:

Accepted Answer

A)   political effect of FDI.
B)   resource-transfer effect of FDI.
C)   balance-of-payments effect of FDI.
D)   bandwagon effect of FDI.E) A) and D)
F) B) and D)

Question 8

The _____ suggests that a firm will establish production facilities where foreign assets or resource endowments that are important to the firm are located.

Accepted Answer

A)   product life-cycle theory
B)   internalization theory
C)   multipoint competition theory
D)   eclectic paradigmE) A) and C)
F) A) and B)

Question 9

The two most common methods of restricting inward FDI are ownership restraints and performance requirements.

Accepted Answer

A) True 
 B)False

Question 10

The free market view argues that FDI is a benefit to both the source country and to the host country.

Accepted Answer

A) True 
 B)False

Question 11

A country's _____ keeps track of its payments to and its receipts from other countries.

Accepted Answer

A)   federal payments ledgers
B)   concurrent accounts
C)   checks-and-balances accounts
D)   balance-of-payments accountsE) A) and B)
F) B) and D)

Question 12

Describe some of the home country policies that encourage outward FDI.

Accepted Answer

Many investor nations now have governmen...

Question 13

_____ arises when two or more enterprises encounter each other in different regional markets, national markets, or industries.

Accepted Answer

A)   Horizontal integration
B)   Multipoint competition
C)   An oligopoly
D)   Vertical integrationE) None of the above
F) All of the above

Question 14

Which of the following factors has made the United States an attractive target for foreign direct investment?

Accepted Answer

A)   Its unstable economy
B)   Its unfavorable political environment
C)   Its wealthy domestic markets
D)   Its closed societyE) A) and B)
F) None of the above

Question 15

Recent years have seen a marked increase in the number of countries that adhere to a radical ideology regarding FDI.

Accepted Answer

A) True 
 B)False

Question 16

Internalization theory seeks to explain why firms often prefer foreign direct investment over licensing as a strategy for entering foreign markets.

Accepted Answer

A) True 
 B)False

Question 17

Licensing would be a good option for firms in which of the following industries?

Accepted Answer

A)   High-technology industries in which protecting firm-specific expertise is of paramount importance.
B)   Global oligopolies, in which competitive interdependence requires that multinational firms maintain tight control over foreign operations.
C)   Industries in which intense cost pressures require that multinational firms maintain tight control over foreign operations.
D)   In fragmented, low-technology industries in which globally dispersed manufacturing is not an option.E) None of the above
F) B) and C)

Question 18

John Dunning pioneered the eclectic paradigm.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is a direct consequence of the interdependence between firms in an oligopoly?

Accepted Answer

A)   Increased regulation
B)   Increased consumer welfare
C)   Imitative behavior
D)   Longer product life-cyclesE) C) and D)
F) B) and C)

Question 20

Discuss the pragmatic nationalist view toward FDI.

Accepted Answer

The pragmatic nationalist view is that F...

Exam 8: Foreign Direct Investment

The _____ suggests that a firm will establish production facilities where foreign assets or resource endowments that are important to the firm are located.

Correct AnswerverifiedShow Answer

What is multipoint competition? How do firms respond to multipoint competition?

Correct AnswerverifiedMultipoint competition arises when two o...View AnswerShow Answer

According to Knickerbocker's theory:

Correct AnswerverifiedShow Answer

What are location-specific advantages? How do they help explain FDI?

Correct AnswerverifiedLocation-specific advantages are advanta...View AnswerShow Answer

Which of the following is a direct consequence of the interdependence between firms in an oligopoly?

Correct AnswerverifiedShow Answer

Discuss the pragmatic nationalist view toward FDI.

Correct AnswerverifiedThe pragmatic nationalist view is that F...View AnswerShow Answer

Recent years have seen a marked increase in the number of countries that adhere to a radical ideology regarding FDI.

Correct AnswerverifiedShow Answer

Which of the following factors has made the United States an attractive target for foreign direct investment?

Correct AnswerverifiedShow Answer

A country's _____ keeps track of its payments to and its receipts from other countries.

Correct AnswerverifiedShow Answer

John Dunning pioneered the eclectic paradigm.

Correct AnswerverifiedShow Answer

What is a greenfield investment? How does it compare to an acquisition? Which form of FDI is a firm more likely choose? Explain your answer.

Correct AnswerverifiedFDI can take the form of a greenfield in...View AnswerShow Answer

Licensing would be a good option for firms in which of the following industries?

Correct AnswerverifiedShow Answer

Describe some of the home country policies that encourage outward FDI.

Correct AnswerverifiedMany investor nations now have governmen...View AnswerShow Answer

The two most common methods of restricting inward FDI are ownership restraints and performance requirements.

Correct AnswerverifiedShow Answer

When a company brings capital and/or technology to a host country, the host country benefits from the:

Correct AnswerverifiedShow Answer

_____ arises when two or more enterprises encounter each other in different regional markets, national markets, or industries.

Correct AnswerverifiedShow Answer

Countries adopting a pragmatic stance pursue policies designed to maximize the national benefits and minimize the national costs.

Correct AnswerverifiedShow Answer

The free market view argues that FDI is a benefit to both the source country and to the host country.

Correct AnswerverifiedShow Answer

Internalization theory seeks to explain why firms often prefer foreign direct investment over licensing as a strategy for entering foreign markets.

Correct AnswerverifiedShow Answer

Which of the following is a home-country policy aimed at limiting outward FDI flow?

Correct AnswerverifiedShow Answer

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Multipoint competition arises when two o...
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Location-specific advantages are advanta...
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The pragmatic nationalist view is that F...
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FDI can take the form of a greenfield in...
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Many investor nations now have governmen...
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