Ch. 10 - Study Questions

Which of the following is an advantage of R&D contracts? A) Easy to negotiate and enforce contracts B) Negligible threat from competitors C) Continuous improvement of core innovation capabilities D) Ability to tap into the best, cost-effective locations

Ability to tap into the best, cost-effective locations

_____ refers to the clustering of economic activities in certain locations

Agglomeration

Which of the following is a first-mover advantage? A) Avoidance of clash with a dominant firm at home B) Opportunity to free ride on second mover investments C) Resolution of technological and market uncertainty D) No difficulty in adapting to market changes

Avoidance of clash with a dominant firm at home

A(n) _____ is a non-equity 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.

BOT agreement

Which of the following is an advantage of direct exports? A) No trade barriers B) Low transportation costs for bulky products C) Avoid export processes D) Better control over distribution

Better control over distribution

_____ is the difference between two cultures along identifiable dimensions.

Cultural distance

_____ are the most basic non-equity mode of entry, capitalizing on economies of scale in production concentrated in the home country and providing better control over distribution.

Direct exports

Which of the following is true of modes of entry? A) Non-equity modes require the establishment of independent organizations overseas. B) Non-equity modes are methods used to enter a market in the home country. C) Equity modes are indicative of relatively larger, harder-to-reverse commitments. D) Equity modes do not require the establishment of independent organizations overseas.

Equity modes are indicative of relatively larger, harder-to-reverse commitments.

Which of the following is a late-mover advantage? A) Pre-emption of scarce resources B) Fewer technological and market uncertainties C) Proprietary and technological leadership D) Good relationships with key stakeholders such as governments

Fewer technological and market uncertainties

Which of the following conforms to the notion put forward by the school of thought associated with stage models? A) Firms will enter culturally distant countries during their first stage of internationalization. B) Considerations of strategic goals are more important than cultural/institutional considerations. C) Natural resource-seeking firms have compelling reasons to enter culturally and institutionally distant countries. D) Firms enter culturally distant countries in later stages when they may gain more confidence.

Firms enter culturally distant countries in later stages when they may gain more confidence.

Which of the following characterizes an MNE from a non-MNE? A) It enters foreign markets via non-equity modes. B) It exports or imports with or without FDI. C) It enjoys OLI advantages. D) It enters foreign markets through FPI.

It enjoys OLI advantages.

Which of the following entry modes is a type of strategic alliance? A) Licensing B) Wholly owned subsidiary C) Acquisition D) Export

Licensing

In the LLL framework, _____ refers to an emerging MNE's ability to identify and bridge gaps in its market.

Linkage

Which of the following is a disadvantage of licensing and franchising A) Little control over marketing B) High development costs C) High risk in overseas expansion D) Creation of a monopoly

Little control over marketing

Which of the following is an advantage shared by both greenfield operations and acquisitions? A) Protection of know-how B) Fast entry speed C) Add new capacity to industry D) Low development costs

Protection of know-how

_____ refers to the amount of resources committed to entering a foreign market.

Scale of entry

Which of the following is true of licensing/franchising? A) The licensor/franchisor has to bear the full costs and risks associated with foreign expansion. B) The licensing/franchising strategy creates very limited competitors. C) The licensor/franchisor has the ability to coordinate globally. D) The licensor/franchisor does not have tight control over production and marketing.

The licensor/franchisor does not have tight control over production and marketing.

Which of the following is a benefit of large-scale entries? A) There are no losses even if these large-scale "bets" turn out to be wrong. B) They have unlimited strategic flexibility in all markets. C) They experience no liability of foreignness. D) They demonstrate strategic commitment to certain markets.

They demonstrate strategic commitment to certain markets.

Which of the following is true of indirect exports? A) They typically provoke protectionism, potentially triggering antidumping actions. B) They treat foreign demand as an extension of domestic demand. C) They export through domestically based export intermediaries. D) They do not enjoy the economies of scale similar to direct exports.

They export through domestically based export intermediaries.

In _____, clients pay contractors to design and construct new facilities and train personnel.

Turnkey projects

Which of the following is a non-equity mode of entry? A) Acquisitions B) Joint ventures C) Turnkey projects D) Green-fields

Turnkey projects

Greenfield operations are similar to acquisitions in that they are both examples of _____.

Wholly owned subsidiaries

Which of the following is an equity mode of entry? A) Indirect exports B) Wholly owned subsidiaries C) R&D contracts D) Licensing/franchising

Wholly owned subsidiaries

A greenfield operation refers to _____. A) a new corporate entity created and jointly owned by two or more parent companies B) a wholly owned subsidiary created by building a new factory and offices from scratch C) a wholly owned subsidiary created by acquisition D) an outsourcing agreement in R&D between firms

a wholly owned subsidiary created by building a new factory and offices from scratch

Companies with market-seeking strategic goals search for _____. A) abundance of strong market demand and customers willing to pay B) economies of scale and abundance of low cost factors C) abundance of innovative individuals, firms, and universities D) particular foreign locations where the required resources are found

abundance of strong market demand and customers willing to pay

With regard to foreign market entry, the resource-based view argues that foreign firms need to: A) take actions deemed legitimate and appropriate by the various formal and informal institutions governing market entries. B) be aware of the numerous regulatory risks and trade and investment barriers. C) deploy overwhelming resources and capabilities to offset their liability of foreignness. D) understand the numerous differences in cultures, norms, and values.

deploy overwhelming resources and capabilities to offset their liability of foreignness.

Efficiency-seeking firms go to countries that have _____. A) an abundance of natural resources and related transport and communication infrastructure B) a strong demand for their products and services C) world-class innovations (innovative individuals, firms, and universities) D) economies of scale and abundance of low-cost factors

economies of scale and abundance of low-cost factors

Co-marketing refers to _____. A) a project in which clients pay contractors to market and distribute the product/service B) outsourcing agreements in marketing between firms C) efforts among a number of firms to jointly market their products and services D) selling the rights to intellectual property to another firm for a royalty fee

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

The distinction between _____ is what defines an MNE from a firm that merely exports or imports. A) direct and indirect exports B) licensing and franchising C) small- and large-scale of entry D) equity and non-equity modes of entry

equity and non-equity modes of entry

A disadvantage of acquisitions is _____.

high development costs

An advantage of joint ventures is _____. A) the protection of know-how B) the access to partners' assets C) the ease of global coordination D) the complete equity and operational control

the access to partners' assets

A recent survey revealed that more than nine out of ten people prefer a watch made by firms in Switzerland to one made in India or U.S.A or any other country. This is an example of _____.

the country of origin effect

Liability of foreignness is _____. A) the positive perception of firms and products of the host country B) the negative perception of firms and products of the home country C) the inherent disadvantage foreign firms experience in host countries D) the inherent advantage foreign firms experience in home countries

the inherent disadvantage foreign firms experience in host countries

The country-of-origin effect refers to _____. A) the inherent advantages domestic firms experience in their home countries B) the inherent disadvantages foreign firms experience in home countries C) the positive or negative perception of firms and products from a certain country D) only the negative perception of firms and products from a certain country

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

Natural resource-seeking firms have compelling reasons to enter culturally and institutionally distant countries. This is a counter example of _____.

the stage model