Connect 8

The World Trade Organization has based the majority of its efforts on pushing for the liberalization of regulations governing _____.

services

Firms for which licensing is a good option tend to have what two characteristics?

tight control over foreign operations not necessary low-tech industries

What country in Latin America has been the highest recipient of inward FDI in recent years?

Brazil

The relative bargaining power of a country depends on which three factors?

Each party's time horizon The value each side places on what the other has to offer The number of comparable alternatives available to each side

Which of the following is a benefit of inward FDI for a host country?

Employment effect

Jamal's company wants to retain tight control over a foreign entity in order to get the maximum impact of market share. His company should utilize _____.

FDI

When a firm invests directly in a foreign market to produce or market a product, it is called _____.

FDI

What is an accurate summary of the rationale behind the free market view?

FDI is a benefit to both the source country and the host country.

True or false: A direct effect of FDI occurs when new jobs result based on the increased total spending by employees of the MNE.

False

Choose the three benefits of FDI to a home country.

Inward flow of foreign earnings Foreign subsidiary creates demand for home-country exports MNE learns skills from exposure to foreign market

What are two measures countries can employ to restrict foreign direct investment?

Performance requirements Ownership restraints

What are two common incentives governments offer to foreign firms to invest in their country?

Subsidies Low-interest loans

How has the flow of FDI compared to the growth in world trade since 1990?

The flow of FDI has accelerated faster than the growth in world trade.

Which is TRUE for firms considering foreign direct investment?

The host government's attitude toward FDI should be an important variable in decisions about where to invest.

True or false: One way a government can encourage FDI is to offer a foreign firm a tax concession if it chooses to do business in that country.

True

What country has been the largest source of FDI since World War II?

United States

What are three positive contributions FDI can provide to a host country? (Check all that apply.)

balance of payment effects resource transfer effects economic growth

Tracking its expenditures and its receipts from other countries occurs in a country's ___ of ___ accounts.

balance, payment or payments

The results of a negotiation depend on the ______ power of the parties involved.

bargaining

Tariffs and quotas are examples of _____ to foreign direct investment.

barriers

When a company moves operations overseas to take advantage of lower labor costs, this strategy increases the overall efficiency of resource utilization in the global economy. According to the free market view of FDI, this benefits

both the home and the host countries.

The ____ effects of FDI arise when a multinational enterprise hires host-country citizens and the _____ effects arise when local suppliers hire workers as a result of the FDI.

direct, indirect

At one time, the British advanced corporation tax system taxed British companies' foreign earnings at a higher rate than their domestic earnings. This was put in place to

encourage companies to invest at home.

What are the two types of FDI?

establishing a new operation in a foreign market acquisition or merger with an existing foreign firm

Kennedy Construction Corp. wants to create a presence internationally but does not want to establish operations in a foreign country. What could the company do to accomplish this?

exporting

Kimberly's company produces body lotion in the United States and ships it overseas to retail stores that sell the product. Her company is delivering product through _____.

exporting

The main reason why businesses prefer acquisition as a means of FDI is because acquisitions are ________ than greenfield investments.

faster to execute

Bethany's company holds valuable know-how in the electronics industry and the company realizes this knowledge cannot be adequately protected. In this situation, what would be more profitable for Bethany's company?

foreign direct investment

What is a company participating in when it directly invests in facilities to produce or market in a foreign country?

foreign direct investment

What are two limitations of licensing?

gives away valuable know-how to a potential competitor firm does not have tight control over producing, marketing and strategy in a foreign country

A(n) ___ investment occurs when a firm goes to a foreign market and establishes a new operation.

greenfield

Toyota prefers direct investment in a foreign entity rather than licensing. This decision stems from the fact that Toyota pioneered _____ production, which enables it to produce higher quality automobiles at a lower cost than global rivals.

lean

Businesses should seek out a country that has ______ policies toward FDI.

lenient

Internalization theory tries to explain why firms often prefer FDI over _____ as a method for getting into foreign markets.

licensing

What are two characteristics of an oligopoly?

limited number of firms large firms

When ownership restraints are used to restrict FDI, it is based on the idea that _____ owners can help maximize the employment benefits of FDI for the host country.

local

The increase in competition in the national telecommunications market that resulted from the 1997 World Trade Organization agreement resulted in what two benefits?

lower prices modernization of telephone networks

FDI _____ describe the flow of FDI out of a country.

outflows

The various theories of FDI try to explain the _____ of FDI flows, which deals with why certain locations are favored as targets of FDI.

pattern

Critics argue that not all new jobs created by FDI represent net additions in employment. This is due to the _____ effect where some jobs created are offset by jobs lost elsewhere.

substitution

One result of ____ effects is that the net number of new jobs created by FDI may not be a large as initially claimed.

substitution

Inflows of FDI are described as

the flow of FDI into a country