Global business Ch 8

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

1.) Exporting 2.)Licensing

What are the two most common incentives governments offer to foreign firms to invest in their country?

1.) Low-interest loans 2.) Subsidies

What two positive contributions to a host country can FDI provide? (Check all that apply.)

1.) Supply capital, technology & management resources 2.) Boost a country's economic growth rate

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

FDI

Venezuela and Bolivia are examples of countries that have become more______ to FDI.

Hostile

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

The stock of foreign direct investment refers to the total...

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

A country's ___________ accounts track expenditures and receipts from other countries.

balance-of-payments

A government would be concerned when the country is running a ______ on the current account of their balance of payments.

deficit

The ______ effects of FDI come when a multinational enterprise hires host-country citizens and ______ effects come when local suppliers hire workers as a result of the FDI.

direct; indirect

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

encouraged

Producing a good at home and then shipping it to another country for sale is called _______.

exporting

Businesses should seek out a country that has_____ policies toward FDI

favorable

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

flow

The ______ view of FDI states that international production should be allocated based on the theory of comparative advantage.

free market

FDI occurs when a company invests in facilities...

in a foreign country.

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_____ of sovereignty and autonomy.

loss

FDI that serves the home market is called ______ production.

offshore

The board of directors of Green Garden Supply in Vermont voted to invest in a production facility in Mexico as a way to lower costs and free up financial resources for the company to grow in other areas. What form of FDI is this company using?

offshore production

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

oligopoly

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

profits

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

What are two potential costs of FDI to host countries?

1.) Adverse effects on balance of payments 2.) Adverse effects on competition within the host nation

What are two current trends in FDI? (Check all that apply.)

1.) An increase in the volume of FDI 2.) An increase in FDI aimed at countries that have liberalized their FDI regimes

Identify two costs of FDI to a home country.

1.) Balance of payments are negatively affected if FDI is a substitute for direct exports. 2.)Balance of payments are negatively affected if purpose of FDI is to develop a low-cost production location.

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

1.) FDI has been driven by political and economic changes in developing nations. 2.) Despite the decline in trade barriers, firms still fear protectionist pressures.

Identify two benefits of FDI to a home country.

1.) Foreign subsidiary creates demand for home-country exports 2.)MNE learns skills from exposure to foreign market

What are two characteristics of the eclectic paradigm?

1.) It provides a single holistic explanation of foreign direct investment 2.) it combines the best aspects of other theories of foreign direct investment into a single explanation

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?

1.) They provided the base for many of the largest and best-capitalized businesses. 2.) They were the most developed nations with the largest economies in the postwar period.

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

1.) a combination of avoiding exporting and licensing and entering the same markets as their competitors. 2.) why competitive firms will often enter the same markets as the same times. 3.) why firms don't use exporting and licensing to enter foreign markets.

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

1.) stable economy 2.)large domestic markets

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

1.) the host government places a low value on what the firm has to offer 2.) the firm has only a short period of time to complete the negotiations

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

WTO

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

developed

To encourage FDI, many countries have eliminated ______ taxation of foreign income.

double

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

eclectic paradigm

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

employment effects

______ refers to shipping goods and services out of the jurisdiction of a country.

exporting

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

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

A low-cost, no-frills grocery store chain that began in the United States decided to open similar stores in Germany which did not have any stores like this. What type of FDI is this company using?

greenfield investment

Foreign direct investment can be in the form of a(n) ______ which occurs when a firm establishes a new operation in a foreign market.

greenfield investment

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.

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.

outflow

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

True or false: Tax concessions can be used by a government to encourage foreign firms to do business in that country.

true

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

united states