IBUS Chapters 9 and 10

Worldwide, SMEs generate what percentage of employment?

60 to 90 percent

According to Rugman and Verbeke, about how many MNEs were classified as truly global in 2001?

9

Worldwide, small- and medium-sized companies (SMEs) account for about what percentage of firms?

95 percent

international entrepreneurship

A combination of innovative, proactive, and risk-seeking behavior that crosses national borders and is intended to create wealth in organizations.

letter of credit (L/C)

A financial contract that states that the importer's bank will pay a specific sum of money to the exporter upon delivery of the merchandise.

Export Intermediaries

A firm that performs an important middleman function by linking domestic sellers and foreign buyers that otherwise would not have been connected.

Small and medium-sized enterprise (SME)

A firm with fewer than 500 employees in the United States and with fewer than 250 employees in the European Union.

LLL advantages

A firm's quest of linkage (L) advantages, leverage (L) advantages, and learning (L) advantages. These advantages are typically associated with multinationals from emerging economies.

entrepreneurs

A founder and/or owner of new businesses or managers of existing firms who identifies and exploits new opportunities.

Non-equity mode

A mode of entry (exports and contractual agreements) that tends to reflect relatively smaller commitments to overseas markets.

stage model

A model of internationalization that portrays the slow step-by-step (stage-by-stage) process an SME must go through to internationalize its business.

Joint venture (JV)

A new corporate entity created and jointly owned by two or more parent companies.

Build-operate-transfer (BOT) agreement

A nonequity mode of entry used to build a longer-term presence by building and then operating a facility for a period of time before transferring operations to a domestic agency or firm.

Microfinance

A practice to provide micro loans ($50-$300) used to start small businesses with the intention of ultimately lifting the entrepreneurs out of poverty.

Born global firm (international new venture)

A start-up company that attempts to do business abroad from inception.

Wholly owned subsidiary (WOS)

A subsidiary located in a foreign country that is entirely owned by the parent multinational.

indirect export

A way to reach overseas customers by exporting through domestic-based export intermediaries.

serial entrepreneur

An entrepreneur who starts, grows, and sells several businesses throughout a career.

venture capitalists

An investor who provides risk capital for early stage ventures.

first-mover advantage

Benefits that accrue to firms that enter the market first and that late entrants do not enjoy.

late-mover advantage

Benefits that accrue to firms that enter the market later and that early entrants do not enjoy.

Greenfield operation

Building factories and offices from scratch (on a proverbial piece of "green field" formerly used for agricultural purposes).

Co-marketing

Efforts among a number of firms to jointly market their products and services.

An American fast-food chain that moves into Canada by buying an existing Canadian fast-food chain represents what type of entry mode?

Equity WOS

All of the following are examples of nonequity entry modes into a foreign country EXCEPT:

FDI

A firm that only exports goods with no FDI in a foreign country is usually categorized as an MNE.

False

A new organization that is created and jointly owned by two or more parent companies is called a joint tenant.

False

Cultural distance is the opposite of institutional distance.

False

For first-movers, their pioneering status guarantees them continued success.

False

Foreign-owned firms in host countries typically experience "the foreign advantage."

False

Licensing is typically used in service industries such as fast-food chains.

False

Only MNEs have the resources to do business globally.

False

SMEs typically operate only domestically, and only large MNEs typically do business in other countries.

False

Societies that are individualistic and have low uncertainty-avoidance tend to foster fewer entrepreneurs.

False

Worldwide, SMEs create about 60 percent of the total value added to products.

False

Franchising

Firm A's agreement to give Firm B the rights to use A's proprietary assets for a royalty fee paid to A by B. This is typically done in service industries.

Which is NOT one of the 4Fs of entrepreneurial financing?

Foreigners

All of the following are examples of nonequity entry modes into a foreign country EXCEPT:

JVs

Microfinancing is defined as:

Loaning small sums of money (e.g. US$50 to US$300) to entrepreneurs in an attempt to lift them out of the poverty level.

Modes of Entry

Method used to enter a foreign market.

Equity mode

Mode of entry (JV and WOS) that indicates a relatively larger, harder-to-reverse commitment.

A Domino's Pizza restaurant that is opened in China represents what type of entry mode?

Nonequity contractual agreement

research and development (R&D) contracts

Outsourcing agreement in R&D between firms.

turnkey project

Project in which clients pay contractors to design and construct new facilities and train personnel.

Scale of entry

The amount of resources committed to entering a foreign market.

location-specific advantages

The benefits a firm reaps from the features specific to a place.

cultural distance

The difference between two cultures along identifiable dimensions such as individualism.

Institutional distance

The extent of similarity or dissimilarity between the regulatory, normative, and cognitive institutions of two countries.

Entrepreneurship

The identification and exploitation of previously unexplored opportunities.

country of origin effect

The positive or negative perception of firms and products from a certain country.

direct export

The sale of products made by firms in their home country to customers in other countries.

A new organization that is created and jointly owned by two or more parent companies is called a JV.

True

As a firm moves from direct exports, to licensing, to FDI, the resources required for operating the business typically increase.

True

Cultural distance is a subset of institutional distance.

True

Foreign-owned firms in host countries typically experience a "liability of foreignness."

True

Franchising is typically used in service industries such as fast-food chains.

True

Most Americans perceive German cars to be superbly designed and manufactured due to the country-of-origin effect.

True

Societies that are collectivistic and have high uncertainty-avoidance tend to have fewer entrepreneurs.

True

Switching costs due to brand loyalty to a first-mover company are a barrier to entry for late entrants to a country.

True

Worldwide, SMEs create about half of the total value added to products.

True

A green-field operation is:

a factory or office built from scratch.

Wealthy individual investors who become a source of entrepreneurial financing for a start-up business are called:

angels

Products that are made by an entrepreneur in his or her home country and sold to customers in other countries are called:

direct exports

Founders and/or owners of new businesses or managers of existing firms who identify and exploit new opportunities are called:

entrepreneurs

In the U.S., small- and medium-sized companies (SMEs) are defined as having:

fewer than 500 employees

Benefits that come to firms that enter a market first and that late-entrants do not have are called:

first-mover advantages

Benefits that come to firms that enter a market after many others have done so and that early entrants do not have are called:

late-mover advantages

In a minority JV, the corporate parent company has:

less than 50% equity

When an investor loans small sums of money (e.g. US$50 to US$300) to entrepreneurs in an attempt to lift them out of the poverty level, this is called:

microfinancing