BUSA 3000 Chapter 5
92) Earth-Rite executives are considering internalizing operations in Brazil. Which of the following, if TRUE, best supports this plan?
C) By internalizing operations, Earth-Rite will retain control of product quality.
93) Relative efficiency of production refers to the total value of assets that MNEs own abroad via their investment activities.
Answer: FALSE
96) According to the internalization theory, firms must reduce control over foreign operations in order to enhance overall effectiveness.
Answer: FALSE
27) Comparative advantage includes inherited resources, such as labor, climate, arable land, and petroleum reserves.
Answer: TRUE
30) Adam Smith attacked the mercantilist view by suggesting that nations benefit most from free trade.
Answer: TRUE
32) According to the absolute advantage principle, national prosperity is the result of a positive balance of trade, achieved by maximizing exports and minimizing imports.
Answer: FALSE
34) According to the comparative advantage principle, what matters most is the absolute cost of production of the product and not the relative efficiency with which a country can produce the product.
Answer: FALSE
52) Entrepreneurial orientation and lack of venture capital are examples of country-specific advantages.
Answer: FALSE
56) Firm strategy, structure, and rivalry of Michael Porter's diamond model refer to the presence of clusters of suppliers, competitors, and complementary firms that excel in particular industries.
Answer: FALSE
58) In today's world, the most important source of national advantage is a country's natural resources.
Answer: FALSE
59) National industrial policies designed to build new capabilities and encourage the emergence of new industries typically exclude superior educational systems.
Answer: FALSE
70) According to the internationalization process model, internationalization takes place in incremental stages over a short time.
Answer: FALSE
73) According to the internationalization process model, a firm starts out in a pre-export phase and is preoccupied with business in its home market.
Answer: FALSE
31) Free trade produces lower-cost imports that help consumers save money, thereby increasing their living standards.
Answer: TRUE
35) Countries can create or acquire comparative advantage.
Answer: TRUE
36) Early trade theories failed to consider the fact that the primary participants in international trade are individual firms that differ in significant ways from each other.
Answer: TRUE
54) Developing new product designs and new ways of organizing or training are some of the ways in which companies innovate.
Answer: TRUE
55) The innovativeness of a nation's firms has a significant impact on the national competitive advantage.
Answer: TRUE
57) Industrial cluster refers to a concentration of businesses, suppliers, and supporting firms in the same industry at a particular geographic location, characterized by a critical mass of human talent, capital, or other factor endowments.
Answer: TRUE
71) In the internationalization process of a firm, the committed involvement stage follows the active involvement stage.
Answer: TRUE
72) According to the internationalization process model, a firm is likely to receive unsolicited product orders from abroad before advancing to the pre-export stage.
Answer: TRUE
74) Born global firms are young companies that internationalize early in their evolution.
Answer: TRUE
75) Born globals have emerged in large numbers for two main reasons: globalization and advances in communication and transportation technologies.
Answer: TRUE
94) A benefit of the monopolistic advantage theory is that firms can operate foreign subsidiaries more profitably than the local firms that compete in their own markets.
Answer: TRUE
95) Monopolistic advantage theory suggests that firms that use FDI as an internationalization strategy must own or control certain resources and capabilities not easily available to competitors.
Answer: TRUE
97) According to Dunning's eclectic paradigm, proprietary technology, managerial skills, trademarks or brand names, and economies of scale are examples of ownership-specific advantages.
Answer: TRUE
53) According to Porter, the competitive advantage of a nation depends on the collective comparative advantages of the country.
Answer:FALSE
37) According to the factor proportions theory, differences in the quantity of factors of production held by countries does determine international trade patterns.
Answer:TRUE
49) Which of the following is TRUE about national industrial policy?
A) It is designed to create monetary and fiscal policies, such as low-interest loans, that provide a stable supply of capital for company investment needs.
28) Modern business executives use the term comparative advantage when referring to the assets of individual firms.
Answer: FALSE
29) Mercantilism benefits consumers because restricting imports increases the choice of domestic products they can buy.
Answer: FALSE
33) David Ricardo advanced the comparative advantage theory.
Answer: TRUE
1) ________ refers to the superior features of a country that provide unique benefits in global competition, typically derived from either natural endowments or deliberate national policies.
A) Comparative advantage
24) The ________ theory states that a country's export eventually becomes its import. A) competitive advantage
C) international product life cycle
14) Which of the following statements strengthens the proposition that free trade is beneficial to nations?
A) Free trade increases the standard of living by reducing consumer expenses.
67) Which of the following explains the expansion of born global firms despite the scarcity of financial, human, and tangible resources?
A) Globalization has made doing international business easier than ever before.
82) ________ is an explanation of the process by which firms acquire and retain one or more value-chain activities inside the firm, minimizing the disadvantages of dealing with external partners and allowing for greater control over foreign operations.
A) Internalization theory
89) Which of the following is TRUE about networks?
A) Networks are neither formal organizations with clearly defined hierarchical structures nor impersonal, decentralized markets.
22) Which of the following is TRUE about the first stage of evolution in the international product life cycle theory?
A) The product enjoys a temporary monopoly at this stage.
12) Which of the following is a typical outcome of free trade?
A) Unrestricted international trade generally increases the overall prosperity of poor countries.
15) According to the ________, a country benefits by producing only those products in which it has complete advantage or that it can produce using fewer resources than another country.
A) absolute advantage principle
62) In which of the following stages of the internationalization process is a firm preoccupied with business in its home market?
A) domestic focus
78) Which of the following explains how firms can use FDI to gain and sustain competitive advantage?
A) monopolistic advantage theory
46) According to Michael Porter, a nation's factor endowments help determine its ________.
A) national competitive advantage
85) Which of the following is an example of an ownership-specific advantage?
A) the physical assets owned by a firm
5) Which of the following is TRUE with regard to competitive advantage?
B) A competitive advantage is difficult for competitors to imitate.
26) Which of the following is TRUE with regard to new trade theory?
B) According to new trade theory, trade is beneficial even for countries that produce only a limited variety of products.
77) ________ describes the total value of assets that MNEs own abroad via their investment activities.
B) FDI stock
8) Which of the following is TRUE with regard to firm-level theories?
B) Firm-level explanations address the question: "How can internationalizing firms gain and sustain competitive advantage?"
80) ________ theory suggests that firms using FDI as an internationalization strategy must own or control certain resources and capabilities not easily available to competitors.
B) Monopolistic advantage
45) Which of the following is TRUE about the determinants of national competitive advantage?
B) The presence of demanding customers pressures firms to innovate faster and produce better products.
90) Which of the following would be the most important for Earth-Rite executives to determine when deciding whether to collaborate with the Brazilian grocery store chain?
B) Would a collaborative venture allow Earth-Rite to internationalize rapidly?
17) Which of the following refers to the ability of a nation to produce a good more efficiently than any other nation?
B) comparative advantage
51) In the context of national industrial policy, which of the following actions by the government of Kazmia would be the most beneficial for the long-term economic security of the country?
B) devoting resources to improve national infrastructure
63) According to the internationalization process model, a firm advances to the ________ stage by initiating limited international activity, typically in the form of basic exporting.
B) experimental involvement
3) Which of the following comparative advantages is acquired over time?
B) innovative capacity
88) Maxdime Inc. is an international automobile manufacturer that has decided to work on low-cost fuel-efficient motorbikes. Foray Inc., a domestic automobile company based in China, is willing to partner temporarily with the R&D team of Maxdime to design and launch motorbikes specially for the Chinese market. This is an example of ________.
B) non—equity-based strategic alliance
18) Which of the following is an element of the comparative advantage principle?
B) relative efficiency of production
86) Which of the following is an example of a location-specific advantage?
B) skilled labor
21) In his International Product Life Cycle (IPLC) Theory, Raymond Vernon observed that each product and its manufacturing technologies go through three stages of evolution: introduction, maturity, and ________.
B) standardization
23) Which of the following is the last stage of evolution in the international product life cycle theory?
B) standardization
20) Which of the following was the analysis revealed by the "Leontief paradox"?
B) that the U.S. often exported labor-intensive goods and imported more capital-intensive goods
42) The ________ is one of the three key modern perspectives that helps explain the development of national competitive advantage.
C) national industrial policy
10) ________ says that nations should accumulate financial wealth, usually in the form of gold, by encouraging exports and discouraging imports.
C) Mercantilism
13) Which of the following, if TRUE, weakens Daniel's proposition?
C) Restricting imports reduces the choice of products consumers can buy.
83) Which of the following is a benefit of internalizing foreign-based value-chain activities?
C) The MNE oversees control of foreign operations and ensures product quality.
16) Which of the following is TRUE about the theory of absolute advantage?
C) The theory emphasizes that nations should open their doors to trade so that people can obtain more goods at cheaper rates.
68) Current trends suggest that early internationalizing firms will ________.
C) become even more common in international business
7) In recent years, business executives and scholars have used ________ to refer to the advantages possessed by nations and individual firms in international trade and investment. A) comparative advantage
C) competitive advantage
44) According to Porter's competitive advantage of nations, ________ refer to the nature of home-market demand for specific products and services.
C) demand conditions
2) Competitive advantage refers to the ________.
C) distinctive assets or competencies of a firm that are difficult for competitors to imitate and are typically derived from specific knowledge, capabilities, skills, or superior strategies
4) Which of the following is a comparative advantage?
C) entrepreneurial orientation
87) Which of the following refers to a collaborative venture which results in a new legal entity?
C) equity-based joint ventures
11) Nations running a trade surplus ________.
C) export more goods than they import
48) A proactive economic development plan initiated by the government, often in collaboration with the private sector, that aims to develop or support particular industries within the country is referred to as ________.
C) national industrial policy
64) Azure Inc. has established a domestic market in clothing and apparel in Thailand and has received orders from abroad. Currently, the firm is investigating the feasibility of undertaking international business. Azure is in the ________ stage of the internationalization process.
C) pre-export
50) According to Porter, Kazmia can attain economic prosperity by systematically cultivating new and superior factor endowments through ________.
C) proactive national industrial policy
66) Born global firms are ________.
C) young companies that internationalize early in their evolution
91) Which of the following benefits would Earth-Rite most likely accrue if it entered into a joint venture with the Brazilian grocery store chain?
D) Earth Rite would have access to the foreign partners' know-how.
9) ________ is the belief that national prosperity is the result of a positive balance of trade, achieved by maximizing exports and minimizing imports.
D) Mercantilism
43) Which of the following statements would be supported by Michael Porter?
D) Rivalry among industry competitors spurs innovation.
69) International entrepreneurship is a new field of scholarly inquiry that is a result of the ________ phenomenon.
D) born global
65) In the ________ stage of the internationalization process, a firm targets numerous foreign markets via various entry modes, especially FDI.
D) committed involvement
6) When a country is not able to produce a good more efficiently than other nations, but produces the good more efficiently than it does any other good, it is said to have a(n) ________.
D) comparative advantage
19) The ________ theory states that countries produce and export goods that require resources available in abundance and import goods that require resources in short supply.
D) factor proportions
25) The new trade theory is mainly at odds with the ________ theory.
D) factor proportions
84) The eclectic paradigm specifies three conditions that determine whether a company will internationalize via FDI. Which of the following refer(s) to one of those conditions?
D) location-specific advantages
79) A ________ is one or more resources or capabilities a company possesses that few other firms have.
D) monopolistic advantage
81) Which of the following refers to an important monopolistic advantage for firms?
D) proprietary technology
47) Which of the following is an example of an industrial cluster?
D) the consumer electronics industry in Japan