International Management - Ch. 8

Since World War II, ___________ has been the largest source country for FDI. Other important source countries - the United Kingdom, the Netherlands, France, Germany, and Japan. Chinese firms have recently emerged as major foreign investors.

America

The location-specific advantages argument associated with _____________ help explain the direction of FDI

Dunning

__________ eclectic paradigm - _______________ advantages - arise from using resource endowments or assets that are tied to a particular location and that a firm finds valuable to combine with its own unique assets ______________ - knowledge spillovers that occur when companies in the same industry locate in the same area

Dunning's , Location-specific, Externalities

______________ Effects: FDI can bring jobs that would otherwise not be created there

Employment

_____________________: occurs when a firm invests directly in new facilities to produce or market in a foreign country

Foreign direct investment (FDI)

____________explored the relationship between FDI and rivalry in oligopolistic industries (industries composed of a limited number of large firms). FDI flows reflect ____________ between firms.

Knickerbocker, strategic rivalry

____________ - granting a foreign entity the right to produce and sell the firm's product in return for a royalty fee on every unit that the foreign entity sells

Licensing

_____________ - exclude foreign firms from certain sectors on the grounds of national security or competition

Ownership restraints

___________________ - used to maximize the benefits and minimize the costs of FDI for the host country

Performance requirements

__________________ Effects: FDI can bring capital, technology, and management resources that would otherwise not be available

Resource Transfer

_______ discovered firms undertake FDI at particular stages in the life cycle of a product they have pioneered. Firms invest in other advanced countries when ____________ in those countries grows large enough to support local production Firms shift production to low-cost developing countries when product standardization and market saturation create ______________ and ______________

Vernon, local demand, price competition, cost pressures

The ________________ account records a country's payments to and receipts from other countries. The current account records a country's export and import of goods and services. A surplus is usually favored over a deficit.

balance-of-payments

The free market view - international production should be distributed among countries according to the theory of _____________________. Countries should specialize in the production of goods and services they can produce __________ The MNE increases the overall efficiency of the world economy

comparative advantage, most efficiently

Historically, most FDI has been directed at the ___________ nations of the world. The United States is a favorite target as is the European Union. More recently, _________ nations have been the recipients of FDI South, East, and Southeast Asia, and particularly China have received significant inflows. Latin America is also emerging as an important region for FDI.

developed, developing

FDI can mean some loss of ______________. Key decisions that can affect the host country's economy will be made by a foreign parent that has no real commitment to the host country, and over which the host country's government has no real control.

economic independence

Adverse Effects on Competition: The subsidiaries of foreign MNEs may have greater _________________ than indigenous competitors because they may be part of a larger international organization The MNE could draw on funds generated elsewhere to subsidize costs in the local market. Doing so could allow the MNE to drive indigenous competitors out of the market and create a ____________ position.

economic power, monopoly

The stock of FDI - the total accumulated value of ______________________ at a given time

foreign-owned assets

In recent years, there has been a strong shift toward the _____________ stance creating: A surge in the volume of FDI worldwide An increase in the volume of FDI directed at countries that have recently liberalized their regimes But, some countries are becoming more hostile to FDI

free market

FDI in the form of ________________: Increases the level of competition in a market Drives down prices Improves the welfare of consumers

greenfield investment

There are two forms of FDI: A ________________ - the establishment of a wholly new operation in a foreign country _______________ with an existing firm in the foreign country

greenfield investment, Buying/Merging

Most cross-border investment involves mergers and acquisitions rather than ___________________

greenfield investments

FDI will be favored over exporting when: Transportation costs are _____ Trade barriers are ______

high, high

The radical view - the MNE is an instrument of __________________ and a tool for exploiting host countries to the exclusive benefit of their capitalist-imperialist home countries

imperialist domination

Many nations : Have government-backed _________ programs to cover major types of foreign investment risk Have eliminated ____________ of foreign income

insurance, double taxation

However, ___________________ is needed to explain why firms prefer FDI to licensing or exporting. _________ is preferable to ________ and FDI as long as transportation costs and trade barriers are low.

internalization theory, Exporting, Licensing

____________ theory (also known as market imperfections) suggests: Licensing could result in a firm's giving away valuable technological ________ to a potential foreign competitor Licensing does not give a firm the _________ over manufacturing, marketing, and strategy in a foreign country that may be required to maximize its profitability Licensing may be difficult if the firm's ___________________ is not amendable to it

internalization, know-how, tight control, competitive advantage

A firm engaged in FDI is a ______________________

multinational enterprise

Knickerbocker's theory can be extended to _________________

multipoint competition

________________: when two or more enterprises encounter each other in different regional markets, national markets, or industries

multipoint competition

The balance-of-payments: The balance of payments suffers from the initial capital outflow required to finance the FDI The current account is ________________ if the purpose of the FDI is to serve the home market from a low-cost production location The current account suffers if the FDI is a ___________ for direct exports

negatively affected, substitute

The ___________________ view - FDI has benefits, (inflows of capital, technology, skills and jobs) and costs (repatriation of profits to the home country and a negative balance of payments effect). FDI should be allowed only if the benefits outweigh the costs

pragmatic nationalist

Licensing is unattractive when: The firm's proprietary property cannot be properly __________ by a licensing agreement The firm needs _________ over a foreign entity in order to maximize its market share and earnings in that country The firm's skills and capabilities are not amenable to licensing

protected, tight control

FDI has grown more rapidly than world trade and world output because: Firms still fear _______________ policies The shift toward democratic political institutions and _______________ economies encourages FDI ____________ is prompting firms to ensure they have a significant presence in many regions of the world

protectionist, free market, Globalization

Acquisitions are attractive because: They are _______ to execute than greenfield investments It is easier and less risky for a firm to acquire ___________ than build them from the ground up Firms believe they can increase the ________ of an acquired unit by transferring capital, technology, or management skills

quicker, desired assets, efficiency

There are two possible adverse effects of FDI on a host country's balance-of-payments: The capital outflows as foreign subsidiaries __________ earnings to the parent country There is a ____ on the current account of the host country's balance of payments associated with imports of input products by the foreign subsidiary

repatriate, debit

FDI can help achieve a current account surplus: If it is a __________ for imports of goods and services If the MNE uses a ______________ to export goods and services to other countries

substitute, foreign subsidiary

FDI will be favored over licensing when: The firm wants control over its __________________ The firm wants control over its __________ and business strategy The firm's capabilities are not amenable to _________

technological know-how, operations, licensing

When transportation costs are high, exporting can be ______________

unprofitable