Chapter 6 INB

Which of the following statements is true of agglomeration?

-Agglomeration advantages stem from knowledge spillover from one firm to another

In the context of foreign direct investment, which of the following statements is true of ownership advantages?

-Firms can beat rivals abroad by acquiring the advantage of proprietary technology of manufacturing products.

Which of the following statements is true of the radical view on foreign direct investment (FDI)

-Governments embracing this view often nationalize multinational enterprise (MNE) assets or simply ban inbound MNEs.

When market failure is minimized through internalization, _____.

-single organization between two firms is established

In international business, when a host country firm acts opportunistically, _____.

-suing the opportunist firm in a foreign country is costly and uncertain

_____ is defined as the possibility of unauthorized diffusion of firm-specific know-how.

Dissemination risk

Hisson Technologies, a computer manufacturing company headquartered in Lumberne, had recently undertaken foreign direct investment (FDI) by setting up its office in the Remfur Republic. The company did not engage in computer distribution in Lumberne, but it invested in computer dealership in the Remfur Republic. In this case, Hisson Technologies was engaged in _____.

Downstream vertical FDI

Knowledge that can be written down and transferred without losing much of its richness is called _____

Explicit knowledge

Citronix Inc. is a semiconductor manufacturing company with its headquarters in Bigania. In its venture to expand business, the company sets up manufacturing units in five other countries where semiconductors are produced and manufactured. In this scenario, Citronix Inc. is engaged in _____.

FDI

_____ refers to holding securities, such as stocks and bonds, of companies in countries outside one's own but does not entail the active management of foreign assets.

FPI

In the long run, the interests of multinational enterprises (MNEs) in host countries can be best safeguarded if MNEs neglect the interests of host countries.

False

International transaction costs tend to be lesser than domestic transaction costs.

False

Location advantage refers to possession and leveraging by a multinational enterprise (MNE) of certain valuable, rare, hard-to-imitate, and organizationally embedded (VRIO) assets overseas.

False

Which of the following political views on foreign direct investment (FDI) does not exist in practice?

Free market view

Rayato Inc. is a cell phone manufacturing company headquartered in Swinland. The company designs, manufactures, and markets cell phones in Swinland. It has recently engaged in foreign direct investment (FDI), setting up its manufacturing units in three other countries. Rayato Inc. has decided to follow the same value-chain stage in the host countries as in Swinland. In this scenario, Rayato Inc. has engaged in

Horizontal FDI

Which of the following statements is true of internalization?

It involves locating and operating in host countries

Bandoy Corp., a renowned cell phone manufacturing company, decided to engage in international business. So, Bandoy Corp. sold its technology to several multinational enterprises in other countries. This market entry mode is an example of _____.

Licensing

From an institution based view, internalization is a response to:

Market imperfections

HiSpark Inc., a leading sports accessories brand, believes that it has to possess rare, hard-to-imitate technology, valuable brand name, and organizationally embedded culture to achieve consistent success as a multinational enterprise. In this case, HiSpark Inc. is focusing on:

Ownership advantage

The _____ is a political view that approves foreign direct investment (FDI) only when its benefits outweigh its costs.

Pragmatic nationalism view on FDI

Which of the following political views is hostile to foreign direct investment (FDI)?

Radical View

A multinational enterprise (MNE), by definition, is a firm that engages in foreign direct investment when doing business abroad.

TRUE

Foreign direct investment (FDI) results in the loss of some economic sovereignty in a host country.

TRUE

Bricklanes Inc. is a company that designs and manufactures materials for interior decorations. The company expands its business in Cronje Republic to gain the advantages of foreign direct investment. As a result, several companies in Cronje Republic have adopted new advancements that are introduced by Bricklanes Inc. in their processes. In this case, which of the following benefits has the host country acquired?

Tech spillover

_____ refers to the domestic diffusion of foreign technical knowledge and processes.

Technology spillover

A non-multinational enterprise (non-MNE) firm can do business abroad by exporting.

True

In the context of international investment, foreign portfolio investment (FPI) is an indirect investment

True

Internalization is a way to combat market failure

True

Tacit knowledge is noncodifiable and its acquisition and transfer requires hands on practice.

True

_____ refers to a type of foreign direct investment (FDI) in which firms move upstream or downstream in different value chain stages in a host country.

Vertical FDI

When one firm enters a foreign country through foreign direct investment (FDI), its rivals are likely to follow by undertaking additional FDI in a host country to:

acquire location advantage

Folexa is the largest producer of spices in the world, and its location is an added advantage to its business. It is surrounded by six trading countries. Besides, located close to the southern region of the continent, it attracts business from the neighboring continents as well. Such clustering of economic activities is referred to as _____.

agglomeration

The international trade between two subsidiaries in two countries controlled by the same multinational enterprise (MNE) is called _____.

intrafirm trade

The free market view on foreign direct investment (FDI)

leads to a win win situation for both home and host countries

In the context of international business, market failure is most likely to result due to:

opportunistic behavior of firms

Picnia Corp., a leading automobile manufacturing company, assembles its cars in Deltaland, but the components are manufactured in Ristasia. In this scenario, Picnia Corp. has engaged in:

upstream vertical FDI