Question 1

The argument that firms prefer FDI over licensing to retain control over know-how,manufacturing,marketing,and strategy or because some firm capabilities are not amenable to licensing constitutes the _____.

Accepted Answer

A)  comparative advantage theory
B)  distribution theory
C)  new trade theory
D)  internalization theoryE) All of the above
F) A) and D)

Question 2

Economists refer to knowledge "spillovers" that occur when companies in the same industry are located in the same area as:

Accepted Answer

A)  technology flows.
B)  overlaps.
C)  corporate espionage.
D)  externalities.E) B) and C)
F) None of the above

Question 3

Many investor nations now have government-backed insurance programs to cover major types of foreign investment risk.One of the types of risks insurable through these programs is the risk of:

Accepted Answer

A)  substitution of domestic production.
B)  domestic competition.
C)  poor strategic tie-ups.
D)  the inability to transfer profits back home.E) C) and D)
F) A) and D)

Question 4

What is franchising? With a suitable example,explain how franchising can be a profitable alternative to FDI.

Accepted Answer

Franchising is essentially the service-i...

Question 5

One of the indirect effects of FDI on employment in a host country arises when:

Accepted Answer

A)  a foreign MNE employs a number of host-country citizens.
B)  jobs are created because of increased local spending by employees of the MNE.
C)  the MNE brings in managers from the home country for its operations.
D)  a number of employees of the MNE are deputed in subsidiaries in other countries.E) All of the above
F) B) and D)

Question 6

Which of the following is a risk associated with FDI?

Accepted Answer

A)  Giving away valuable technological know-how to a potential competitor
B)  High transportation costs,especially of products that have a low value-to-weight ratio
C)  Doing business in a different culture where the rules of the game may be very different
D)  Actual or threatened trade barriers such as import tariffs or quotasE) A) and B)
F) All of the above

Question 7

When FDI takes the form of an acquisition of an established enterprise in the host economy as opposed to a greenfield investment,the immediate effect may be to _____ as the multinational tries to restructure the operations of the acquired unit to improve its operating efficiency.

Accepted Answer

A)  aggressively recruit local personnel
B)  install local personnel in key management positions
C)  apply for public funding through an initial public offering
D)  reduce employmentE) A) and B)
F) A) and C)

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A)  underdeveloped
B)  developing
C)  developed
D)  emergingE) B) and C)
F) A) and B)

Question 10

According to the U.S.Department of Commerce,in the United States _____ occurs whenever a U.S.citizen,organization,or affiliated group takes an interest of 10 percent or more in a foreign business entity.

Accepted Answer

A)  multilateral investment
B)  foreign direct investment
C)  reciprocal foreign investment
D)  international divestmentE) B) and D)
F) C) and D)

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

According to the free market view,how does FDI by the MNE increase the efficiency of world economy?

Accepted Answer

A)  The MNE is an instrument for dispersing the production of goods and services to the most efficient locations around the globe.
B)  MNEs extract profits from the host country and take them to their home country and help all countries realize economies of scale.
C)  When an MNE produces products,profits from the investment go abroad,and hence the MNE helps foreign exchange to rotate.
D)  A foreign-owned manufacturing plant may import many components from its home country,thus improving the balance of payments of the host country.E) None of the above
F) A) and B)

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

The argument that combining location-specific assets or resource endowments and the firm's own unique assets often requires FDI;it requires the firm to establish production facilities where those foreign assets or resource endowments are located,constitutes the _____ of FDI.

Accepted Answer

A)  disparate elements approach
B)  integration approach
C)  scramble theory
D)  eclectic paradigmE) A) and C)
F) B) and C)

Question 15

Briefly describe on any two main benefits of FDI for a host-country.

Accepted Answer

The main benefits of FDI for the host co...

Question 16

In Europe in 2006,there was a hostile political reaction to the attempted takeover of Europe's largest steel company,Arcelor,by Mittal Steel,a global company controlled by the Indian entrepreneur Lakshmi Mittal.In mid-2005 China National Offshore Oil Company withdrew a takeover bid for Unocal of the United States after highly negative reactions in Congress about the proposed takeover of a "strategic asset" by a Chinese company.These incidents are evidence to the fact that:

Accepted Answer

A)  FDI flow from developing countries to developed ones is largely unwelcome.
B)  developed countries do not feel the need to court FDIs.
C)  developed nations,to a far greater extent,are hostile to FDI than developing nations.
D)  hostile reactions to inward FDI are not restricted to developing nations.E) All of the above
F) A) and D)

Question 17

With developed nations still accounting for the largest share of FDI inflows,FDI into developing nations has steadily decreased over the past decade.

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

To encourage inward FDI,it is increasingly common for governments to:

Accepted Answer

A)  offer tax concessions to firms that invest in their countries.
B)  exclude foreign companies from specific industries.
C)  require that local investors own significant proportion of the equity.
D)  establish control over the behavior of the MNE's local subsidiary.E) C) and D)
F) A) and D)

Question 20

The stock of foreign direct investment refers to:

Accepted Answer

A)  the total accumulated value of foreign-owned assets at any time.
B)  the number shares of the foreign firm held by local investors.
C)  the amount of FDI undertaken over a given time period.
D)  the dividend amount paid by the foreign firm to local investors.E) A) and D)
F) B) and C)

Exam 7: Foreign Direct Investment

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

Correct Answer
verified

Briefly describe on any two main benefits of FDI for a host-country.

Correct Answer
verified
The main benefits of FDI for the host co...
View Answer

The argument that combining location-specific assets or resource endowments and the firm's own unique assets often requires FDI;it requires the firm to establish production facilities where those foreign assets or resource endowments are located,constitutes the _____ of FDI.

Correct Answer
verified

When FDI takes the form of an acquisition of an established enterprise in the host economy as opposed to a greenfield investment,the immediate effect may be to _____ as the multinational tries to restructure the operations of the acquired unit to improve its operating efficiency.

Correct Answer
verified

The argument that firms prefer FDI over licensing to retain control over know-how,manufacturing,marketing,and strategy or because some firm capabilities are not amenable to licensing constitutes the _____.

Correct Answer
verified

Economists refer to knowledge "spillovers" that occur when companies in the same industry are located in the same area as:

Correct Answer
verified

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

Correct Answer
verified

What is franchising? With a suitable example,explain how franchising can be a profitable alternative to FDI.

Correct Answer
verified
Franchising is essentially the service-i...
View Answer

To encourage inward FDI,it is increasingly common for governments to:

Correct Answer
verified

Many investor nations now have government-backed insurance programs to cover major types of foreign investment risk.One of the types of risks insurable through these programs is the risk of:

Correct Answer
verified

Correct Answer
verified

With developed nations still accounting for the largest share of FDI inflows,FDI into developing nations has steadily decreased over the past decade.

Correct Answer
verified

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

Correct Answer
verified

The stock of foreign direct investment refers to:

Correct Answer
verified

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

Correct Answer
verified

One of the indirect effects of FDI on employment in a host country arises when:

Correct Answer
verified

Which of the following is a risk associated with FDI?

Correct Answer
verified

According to the U.S.Department of Commerce,in the United States _____ occurs whenever a U.S.citizen,organization,or affiliated group takes an interest of 10 percent or more in a foreign business entity.

Correct Answer
verified

According to the free market view,how does FDI by the MNE increase the efficiency of world economy?

Correct Answer
verified

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

Correct Answer
verified

Exam 7: Foreign Direct Investment

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

Correct AnswerverifiedShow Answer

Briefly describe on any two main benefits of FDI for a host-country.

Correct AnswerverifiedThe main benefits of FDI for the host co...View AnswerShow Answer

The argument that combining location-specific assets or resource endowments and the firm's own unique assets often requires FDI;it requires the firm to establish production facilities where those foreign assets or resource endowments are located,constitutes the _____ of FDI.

Correct AnswerverifiedShow Answer

When FDI takes the form of an acquisition of an established enterprise in the host economy as opposed to a greenfield investment,the immediate effect may be to _____ as the multinational tries to restructure the operations of the acquired unit to improve its operating efficiency.

Correct AnswerverifiedShow Answer

The argument that firms prefer FDI over licensing to retain control over know-how,manufacturing,marketing,and strategy or because some firm capabilities are not amenable to licensing constitutes the _____.

Correct AnswerverifiedShow Answer

Economists refer to knowledge "spillovers" that occur when companies in the same industry are located in the same area as:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

What is franchising? With a suitable example,explain how franchising can be a profitable alternative to FDI.

Correct AnswerverifiedFranchising is essentially the service-i...View AnswerShow Answer

To encourage inward FDI,it is increasingly common for governments to:

Correct AnswerverifiedShow Answer

Many investor nations now have government-backed insurance programs to cover major types of foreign investment risk.One of the types of risks insurable through these programs is the risk of:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

With developed nations still accounting for the largest share of FDI inflows,FDI into developing nations has steadily decreased over the past decade.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The stock of foreign direct investment refers to:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

One of the indirect effects of FDI on employment in a host country arises when:

Correct AnswerverifiedShow Answer

Which of the following is a risk associated with FDI?

Correct AnswerverifiedShow Answer

According to the U.S.Department of Commerce,in the United States _____ occurs whenever a U.S.citizen,organization,or affiliated group takes an interest of 10 percent or more in a foreign business entity.

Correct AnswerverifiedShow Answer

According to the free market view,how does FDI by the MNE increase the efficiency of world economy?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
The main benefits of FDI for the host co...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Franchising is essentially the service-i...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified