ch 8- foreign direct investment

What are two potential costs of FDI to host countries? (Check all that apply.)

-Adverse effects on competition within the host nation -Adverse effects on balance of payments

What are two alternatives to FDI? (Check all that apply.)

-Exporting -Licensing

The text notes two reasons why FDI has outpaced world trade and world output. What are those two reasons?

-FDI has been driven by political and economic changes in developing nations. -Despite the decline in trade barriers, firms still fear protectionist pressures.

What are two characteristics of the eclectic paradigm? Choose all that apply.

-It combines the best aspects of other theories of foreign direct investment into a single explanation -It provides a single holistic explanation of foreign direct investment

Identify two benefits of FDI to a home country. (Check all that apply.)

-MNE learns skills from exposure to foreign market -Foreign subsidiary creates demand for home-country exports

What two positive contributions to a host country can FDI provide?

-Supply capital, technology, and management resources -Boost a country's economic growth rate

What two factors would indicate that a firm has little bargaining power when considering FDI in a nation?

-The host government places a low value on what the firm has to offer. -The firm has only a short period of time to complete the negotiations.

The United States, the United Kingdom, the Netherlands, France, Germany, and Japan together have accounted for the majority of all FDI outflows for 1998-2018 for what two reasons?

-They provided the base for many of the largest and best-capitalized businesses. -They were the most developed nations with the largest economies in the postwar period.

What are two reasons the United States has been an attractive target for FDI?

-stable economy -large domestic markets

The theories of FDI try to show: (Check all that apply.)

-why competitive firms often enter the same markets at the same time. -why firms use a combination of avoiding exporting and licensing and entering the same markets as their competitors. -why firms don't use exporting and licensing to enter foreign markets.

Which view of FDI is based on the classical international trade theory of Smith and Ricardo asserting that international production should be based on comparative advantage?

Free market

What is a feature of an oligopoly?

Interdependence of major players

Which view of FDI states that there are benefits and costs to FDI and that countries attempt to maximize the benefits and minimize the national costs of FDI?

Pragmatic nationalism

What country has consistently been the largest source of FDI since World War II?

United States

What international organization is involved in the governing of FDI?

WTO

With the formation of the ______ in 1995, there now is a multinational institution that has become involved in regulations governing FDI.

WTO

The stock of foreign direct investment refers to the total

accumulated value of foreign-owned assets at a given point in time.

In the past, most foreign direct investment has been directed at _____ nations.

developed

The ______ argues that combining location specific assets or resource endowments and the firm's own unique assets often requires FDI.

eclectic paradigm

As an alternatives to FDI, firms could choose ______, which involves producing goods at home and shipping them overseas, or ______, which is granting a foreign firm the right to produce and sell a product in return for a royalty fee.

exporting; licensing

Businesses should seek out a country that has ________ policies toward FDI. (Choose restrictive or favorable.)

favorable

The ________ of FDI is the amount of FDI attempted over a period of time (usually one year).

flow

FDI occurs when a company invests in facilities

in a foreign country.

The ability of an individual, company, or economy to conduct an activity better than another for reasons related to location is called a(n)

location-specific advantage.

John Dunning proposed that ______ are an important factor when explaining the nature of foreign direct investment.

location-specific advantages

A host country cost of FDI could be the _________ (gain or loss?) of sovereignty and autonomy.

loss

A(n) ______ is a market form in which a market or industry has a limited number of large firms.

oligopoly

A key cost of FDI for the home country is when the balance of payments is adversely affected by the initial capital _________ required to finance the FDI. (choose inflow or outflow)

outflow

The radical view toward FDI argues that MNE's extract ______ from the host country and take them back to their home country.

profits

A(n) ______ effect has occurred when a company's FDI of capital, technology, and management resources create a positive contribution to a host country that might not otherwise be available.

resource transfer

When Crane Automotive Group developed operations in Italy, it not only built a manufacturing plant there but also imported parts from several other European nations. Which home country benefit of FDI does this represent?

Employment effects

When a firm invests directly in a business or venture in another country, it is called ______.

FDI

Identify two costs of FDI to a home country. (Check all that apply.)

-Balance of payments are negatively affected if purpose of FDI is to develop a low-cost production location. -Balance of payments are negatively affected if FDI is a substitute for direct exports.

The shift toward more democratic political institutions and free market economies has _____ foreign direct investment.

encouraged

The _____ view of foreign direct investment has its basis in Marxist theory.

radical

An example of the pragmatic nationalist view is that the host country can gain in jobs and skills and the profits go to the ______ country.

source