BUSM 380 - CH. 8

The location-specific advantages argument associated with John Dunning explains why firms prefer FDI to licensing or to exporting.

False

According to the _____ international production should be distributed among countries according to the theory of comparative advantage.

Free market view

_______ is also known as the market imperfections theory

Internalization theory

_______ involves guaranteeing a foreign entity the right to produce and sell the firms product in return for a royalty fee on every unit sold.

Licensing

A Chinese petroleum company sets up a crude oil refining facility in Vietnam. This is an example of greenfield investment.

True

According to radical view, the MNE is a tool for exploiting host counties to the exclusive benefit of their capitalist imperialist home countries

True

According to the radical view, the MNE is a tool for exploiting host countries to the benefit of their capitalist imperialist home countries.

True

Direct effects arise when a foreign MNE employs a number of host-country citizens.

True

Offshore production refers to FDI undertaken to serve the home market.

True

In which of the following situations would FDI deteriorate the current account of the host country's balance payments?

When foreign subsiding imports a substantial number of its inputs from abroad.

Identify the correct statement regarding the direction of FDI inflows.

developed nations still account for the largest share of FDI inflows.

Which of the following is a home country policy aimed at limiting outward FDI flowing.

limiting capital flows

The fast food industry is a good example of a business sector where licensing is a poor option for FDI.

False

What is a Greenfield investment

A green field investment involves the establishment of a new operation for a foreign country.

Which account keeps track of the export and import of goods and services

Current account

If General Electric, a U.S. based corporation, purchases a 12% interest in a company in italy, that purchase would be an example of an _______?

Minority Acquisition -foreign firm: 10% - 49% of firms voting stock -Majority: 50% - 99%

Five airlines control 90% of the aviation sector of a country. The aviation industry in the country would be an example of a(n)_______.

Oligopy

Host governments use a wide range of controls to restrict FDI in one way or another, The two most common are ______ and performance requirements.

Ownership Restraints

________ are controls over the behavior of the MNEs local subsiding. The most common of these are related to local content, exports, technology transfer, and local participation in top management.

Performance Requirements

The ______ is that FDI has both benefits and costs. FDI can benefit a host country by bringing capital, skills, technology, and jobs but those benefits come at a cost.

Pragmatic nationalist view

What is the purpose of a greenfield investment?

to establish a new operation in a foreign country