Ch.8 IB T/F

A critical competitive feature of an oligopoly is independence of the major players.

false

According to the pragmatic nationalist view, no country should ever permit foreign corporations to undertake FDI.

false

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

false

By the early 1990s, the radical position toward FDI was in retreat due to the rise of communism in eastern Europe.

false

FDI has grown significantly slower than world trade and world output.

false

Historically, most FDI has been directed at the least developed nations of the world.

false

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

false

Services such as telecommunications, retailing, and many financial services, where the service has to be produced where it is delivered, lend themselves well to exporting.

false

The attractiveness of exporting increases in comparison to FDI or licensing when products have a low value-to-weight ratio.

false

The flow of foreign direct investment refers to the number of countries a firm is investing in at any given point in time.

false

The globalization of the world economy is having a negative effect on the volume of FDI.

false

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

false

When a firm exports its products to a foreign country, foreign direct investment occurs.

false

Economists refer to knowledge "spillovers" as externalities, and there is a well-established theory suggesting that firms can benefit from such externalities by locating close to their source.

true

Franchising is essentially the service-industry version of licensing, although it normally involves much longer-term commitments than licensing.

true

Greenfield investment involves the establishment of a new operation in a foreign country.

true

A firm's bargaining power is low when the host government places a low value on what the firm has to offer.

true

According to the United Nations, the majority of changes made worldwide between 1992 and 2009 in the laws governing foreign direct investment have created a more favorable environment for FDI.

true

According to the extreme version of radical view, no country should ever permit foreign corporations to undertake FDI, because they can never be instruments of economic development, only of economic domination.

true

According to the free market view, countries should specialize in the production of those goods and services that they can produce most efficiently.

true

An acquisition does not result in a net increase in the number of players in a market.

true

By placing tariffs on imported goods, governments can increase the cost of exporting relative to foreign direct investment and licensing.

true

Despite the move toward a free market stance in recent years, many countries still have a rather pragmatic stance toward FDI.

true

Licensing is not a good option if the competitive advantage of a firm is based upon managerial or marketing knowledge that is embedded in the routines of the firm or the skills of its managers, and that is difficult to codify in a "book of blueprints.

true

Many investor nations now have government-backed insurance programs to cover major types of foreign investment risk like the risks of expropriation (nationalization), war losses, and the inability to transfer profits back home.

true

Multipoint competition arises when two or more enterprises encounter each other in different regional markets, national markets, or industries

true

Ownership restraints and performance requirements are the two most common ways in which host governments restrict FDI.

true

Performance requirements are controls over the behavior of the MNE's local subsidiary.

true

Since World War II, the United States has been the largest source country for FDI.

true

The WTO embraces the promotion of international trade in services.

true

The indirect employment effects of FDI are often as large as, if not larger than, the direct effects.

true

The stock of foreign direct investment refers to the total accumulated value of foreign-owned assets at a given time.

true

When a firm allows another enterprise to produce its products under license, the licensee bears the costs or risks.

true