International Business Chapter 8

One potential benefit to consumers related to offshore production is

lower prices for goods

The US department of commerce states that once a business undertakes foreign direct investment it becomes a ____________

multinational enterprise

The radical view toward FDI argues that _________ extract profits from the host country and take them back to their home country

multinational exterprises

What are two current trends in FDI

an increase in the volume of FDI and an increase in FDI aimed at countries that have liberalized their FDI regimes

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

free market

What name is given to the advantages that coincide with utilizing resource endowments or assets tied to a specific area

location-specific

Chose three benefits of FDI to a home country

MNE learns skills from exposure to foreign market, foreign subsidiary creates demand for home-country exports, and inward flow of foreign earnings

What two factors cause major adverse effects on a host country's balance of payments

a foreign subsidiary importing a larger number of inputs from abroad and the outflow of earnings from a foreign subsidiary to its parent company

Which of these factors creates a limitation to exporting

a product that can be produced almost anywhere

What are 3 advantages of FDI

allows the firm to maintain control over technological know-how, allows for tight control over the firm's operations, and overcomes high transportation costs

What positive contributions to a host country can FDI provide

balance of payment effects, economic growth, and resource transfer effects

Identify the three costs of FDI to a home country

balance of payments negatively affected initially from the capital outflow to fund FDI, balance of payments negatively affected if purpose of FDI is to develop a low cost production location, and balance of payments negatively affected if FDI is a substitute for direct exports

tariffs and quotas are examples of ______ to foreign direct investment

barriers

Eastern European countries were opposed to FDI until the late 1980s brought about the demise of

communism

The _______ account tracks goods and services exports and imports in balance-of-payments accounting

current

The concern that an MNE could drive local firms out of business, monopolize the market, and raise prices above those that would prevail in competitive markets is a worry for _________ economies

developing

What are the two types of FDI

establishing a new operation in a foreign market and acquisition or merger with an existing foreign firm

Economics refer to knowledge "spillovers" as ______, and there is a theory that suggests firms can benefit from these "spillovers" by locating close to their source

externalities

an example of ________ is when firms benefit from each other's knowledge generation

externalities

What are two limitations of licensing

firm does not have tight control over producing, marketing, and strategy in a foreign country and gives away valuable know-how to a potential competitor

The ______ of FDI describes the amount of FDI undertake during a year

flow

Firms for which licensing is not a good option are clustered in which three of the following industried

industries with intense cost pressures, global oligopolies, and high-tech industries

Fears of "economic ransom" are irrational, according the Robert Reich, bc of the growing __________ of the world economy

interdependence

Which theory BEST explains why the first firm in an oligopoly decides to undertake foreign direct investment rather than exporting or making a licensing agreement

internalization theory

A host country cost of FDI could be the ______ of sovereignty and autonomy

loss

The situation where multiple firms encounter each other in different regional markets, national markets or industries is called

multi-point competition

The basis in Marxist politics is evident when radical writers argue that _______ enterprises are an instrument of imperialist domination

multinational

Ownership restraints and performance requirements are two ways in which governments can ______ FDI

restrict

The relative bargaining power of a country depends on which three of the following factors

the number of comparable alternatives available to each side, each party's time horizon, and the value each side places on what the other has to offer

FDI theory suggests that exporting is preferable to licensing and FDI as long as what two conditions exist

trade barriers are low and transportation costs are low

It would be more common for a ______ to agree to market aggressively as a way of keeping foreign competitors in check

wholly owned subsidiary

A ________ investment is where a firm goes to a foreign market and establishes a new operation

greenfield

Along with the US, which 5 countries accounted for 60% of all FDI outflows from 1998-2016

germany, japan, france, united kingdom, and the netherlands

What are two characteristics of an ollgopoly

large firms and limited number of firms

Internalization theory tries to explain why firms often prefer FDI over ______ as a method for getting into foreign markets

licensing

Exporting strategy does not work for a ______ value-to-weight ratio product that can be produced anywhere

low

Greenfield investing spurs competition by increasing the number of players in a market and this will ten to ______ prices and ______ economic welfare

lower, increase

When a firm invests directly in a foreign market to product or market a product, it is called _____

FDI

True/False: The pragmatic nationalism view contends that FDI has no costs, but many benefits

False

Dell moved its assembly operations for many of its personal computers to Mexico to take advantage of lower labor costs. The ____ ______ view of FDI states that overall efficiency of resource utilization increases in the world economy

free market

Which of the following describes the inflows of FDI

the flow of FDI into a country

The WTO has based the majority of its efforts on pushing for the liberalization of regulations governing ______

services

True/False: Knickerbocker was concerned with the effect of licensing on industries composed of a limited number of large firms

False- Knickerbocker was concerned with the effect of FDI

The only way a country can support a current account deficit, also known as a trade deficit, in the long-run is to ________

sell off assets to foreigners