MGT4100 Exam 2

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

They export through domestically based export intermediaries.

A real option enables the investor to buy an option for a small initial investment, hold it until a decision point arrives, and then exercise or abandon the option. True False

True

Alliances have emerged as great instruments of real options because of their flexibility to sequentially scale up or scale down investment. True False

True

Alliances permit firms to sequentially increase their investment should they decide to pursue acquisitions. True False

True

Emerging MNEs primarily lack proprietary ownership of technology compared to MNEs from developed economies. True False

True

In the context of alliance formation, shared capabilities is one of the driving forces in deciding whether to take a contract or an equity approach. True False

True

Internalization can help reduce opportunistic behavior in international trade. True False

True

Management of MNE structure, learning, and innovation needs to take into account VRIO. True False

True

One way of combating opportunism in an alliance is to wall off critical capabilities. True False

True

Strategic goals and cultural and institutional distances influence the location of foreign entries. True False

True

The "imitability" of an alliance is based on the trust and understanding between the partners. True False

True

The degree of tacitness is low in non-equity-based alliances. True False

True

The more tacit the capabilities of a firm in an alliance, the greater the preference for equity involvement. True False

True

The preemption of scarce resources is a first-mover advantage. True False

True

The radical view treats FDIs as an instrument of imperialism. True False

True

The scale of entry refers to the amount of resources committed to entering a foreign market. True False

True

A(n) ____ is the transfer of the control of operations and management from one firm to another with the former becoming a unit of the latter. joint venture merger acquisition contractual alliance

acquisition

When an MNE is locally responsive, _____. costs increase the local government's involvement reduces innovations are limited regulations are loosened

costs increase

At stage 1 in the formation of an alliance, a firm must _____. check the degree of tacitness evaluate institutional constraints decide whether growth can be achieved through market transactions choose between a contract or an equity approach

decide whether growth can be achieved through market transactions

Government's confiscation of foreign assets is known as _____. sunk costs expropriation conflicting interests obsolescing bargains

expropriation

The _____ strategy is an extension of the home replication strategy. localization transnational global export

localization

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 agglomeration the liability of foreignness benchmarking

the country-of-origin effect

The set of informal institutions that stresses the cognitive pillar lays emphasis on _____. establishing wholly owned subsidiaries granting more liberal policies copying reputable organizations to ensure a low-cost way to gain legitimacy the internalized taken-for-granted values and beliefs that guide firm behavior

the internalized taken-for-granted values and beliefs that guide firm behavior

In _____, clients pay contractors to design and construct new facilities and train personnel. licensing co-marketing franchising turnkey projects

turnkey projects

Greenfield operations are similar to acquisitions in that they are both examples of _____. wholly owned subsidiaries partially owned subsidiaries equity mode of entry into foreign markets limited to a contractual agreement non-equity mode of entry into foreign markets

wholly owned subsidiaries

____ is the ability to recognize the value of new information, assimilate it, and apply it. Global mandate Absorptive capacity Social capital Micro-macro link

Absorptive capacity

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 JV WOS R&D contract

BOT agreement

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

Better control over distribution

_____ is the difference between two cultures along identifiable dimensions. Cultural cringe Culture shock Reverse culture shock Cultural distance

Cultural Distance

_____ refers to the problems associated with unauthorized diffusion of firm-specific know-how. Dissemination risk Technological spill Knowledge spill Market imperfection

Dissemination risk

_____ is the amount of FDI moving in a given period (usually a year) in a certain direction. Horizontal FDI Vertical FDI FDI flow FDI stock

FDI flow

A firm that exports or imports, with or without FDI, is regarded as an MNE. True False

False

Absorptive capacity refers to the informal benefits that individuals and organizations derive from their social structures and networks. True False

False

Alliances preclude acquisitions. True False

False

Compared to licensing, FDI increases dissemination risks. True False

False

Contractual alliances involve sharing of ownership. True False

False

Cross-border mergers are more common than acquisitions. True False

False

Equity-based alliances include co-marketing, research and development, contracts, turnkey products, strategic suppliers, and strategic distributors. True False

False

Explicit knowledge is noncodifiable and its transfer requires hands-on practice. True False

False

Expropriation refers to the knowledge diffused from one firm to others among closely located firms. True False

False

Greenfield operations are a type of wholly owned subsidiary that does not require any FDI. True False

False

Importance of direct organizational monitoring and control is low in equity-based alliances. True False

False

Liability of foreignness is the inherent disadvantage firms experience in home countries. True False

False

Licensing is a form of equity-based alliance. True False

False

OLI advantages refers to a firm's quest for outsourcing (O) advantages, licensing (L)advantages, and importing (I) advantages. True False

False

Oligopoly happens when an industry is dominated by one company. True False

False

The formal institution-based view that drives mergers and alliances is based on the normative and cognitive pillars. True False

False

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

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

Which is the best-case scenario for a non-equity-based alliance? High tacitness and low influence of formal institutions Low potential as real options and low influence of formal institutions High tacitness and high importance of direct organizational monitoring and control Low tacitness and low importance of direct organizational monitoring and control

High tacitness and high importance of direct organizational monitoring and control

Which of the following strategies is often known as "international strategy"? Home replication Global standardization Transnational Localization

Home replication

_____ refers to the replacement of cross-border markets with one firm locating in two or more countries. Internalization Location advantage Ownership advantage Agglomeration

Internalization

Which element of knowledge management faces the common problem of employee turnover? Knowledge transmission Knowledge outflow Knowledge inflow Knowledge retention

Knowledge retention

Which of the following occurs in the uncoupling stage of an alliance dissolution? Last minute salvage New relationships Reconciliation Mediation by third parties

Last minute salvage

Which of the following is a primary cost of FDI to host countries? Capital inflow Capital and job loss Loss of sovereignty Increase in competition between local firms

Loss of sovereignty

____ is the informal interpersonal relationships among managers of different units that may greatly facilitate intersubsidiary cooperation among various units. Social capital Absorptive capacity Micro-macro link Subsidiary initiative

Micro-macro link

Which of the following is a disadvantage of alliances? Lack of learning race Partner opportunism Value as real options Scale up and scale down of investments

Partner opportunism

____ is the informal benefits individuals and organizations derive from their networks. Social capital Micro-macro link Global mandate Absorptive capacity

Social capital

In which type of equity-based alliance does one firm invest in another? Hubristic investment Cross-shareholding Licensing Strategic investment

Strategic Investment

Which of the following motives for acquisition faces the resource-based issue of access to complementary resources? Collaborative Hubristic Managerial Synergistic

Synergistic

Which of the following economic perspectives on FDI has its principles rooted in Marxism? Laissez-faire Pragmatic nationalism The radical view The free market view

The radical view

Which of the following statements with respect to differences in knowledge management among the four types of MNEs is true? Interdependence on knowledge management in moderate in a transnational strategy. The role of foreign subsidiaries in a localization strategy is to adapt and leverage parent company competencies. There is extensive flow of knowledge and people in multiple directions in a transnational strategy. Knowledge is developed and retained within each subsidiary in a home replication strategy.

There is extensive flow of knowledge and people in multiple directions in a transnational strategy.