Chapter 8 - FDI

The amount invested by U.S. firms in foreign markets between 1998 and 2014 was about

$4 Trillion

All of the countries below are considered to be significant investors in foreign markets over the last 20 years except

Canada

Identify the correct statement regarding the direction of FDI inflows.

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

Johan's company has made a greenfield investment. What does this mean?

It established a new operation in a foreign country.

According to the video, Japan's Toyota has invested $25 billion in production facilities in the United States. Which is not a correct match between an action occurring because of Toyota's investment in the United States and the effect on the host country?

New jobs in Japan are created to facilitate U.S. investment. Effect on host country: employment effect.

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

Performance requirements

_______ has been the world's foreign largest investor since World War II.

The United States

Toyota produces 1.2 million vehicles per year in the United States. Which best explains why Toyota has chosen to produce its vehicles in the United States rather than exporting from Japan?

Toyota is concerned that its ability to export from Japan could be compromised by U.S. tariffs and quotas.

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

When a foreign subsidiary imports a substantial number of its inputs from abroad

In the balance of payments, how does a country record transactions involving the export and import of goods and services?

current account

By limiting imports through quotas, governments decrease the attractiveness of FDI and licensing.

false

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

false

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

false

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

free market

The world flow of foreign direct investment between 1990 and 2017 increased 600 percent. If a company decides to establish a new operation in a foreign country, that company has engaged in

greenfield investment

The United States benefits as a recipient of foreign investment in which of the following ways?

influx of capital and technology

________ theory is also known as the market imperfections theory.

internalization

Toyota's $25 billion investment in the U.S. market indicates that the Japanese company believes that the United States is a strategically important market. When considering future international expansion, if Toyota has valuable know-how that cannot be protected with a licensing contract and also faces high transportation costs, Toyota should

invest directly in target markets

The United States is an attractive destination for foreign investment for all of the following reasons except

its favorable military power.

Computer Contractors has given a foreign entity the right to produce and sell its computer parts in return for a royalty fee on every unit sold. This is called

licensing

Which of the following is a home-country policy aimed at limiting outward FDI flow?

limiting capital outflows

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

oligopoly

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

The ________ view 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

The total accumulated value of foreign-owned assets at a given time is called the ________ of FDI.

stock

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

tru

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

true

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

true

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

true