Question 1

Which of the following is NOT a potential disadvantage of licensing relative to FDI?

Accepted Answer

A) possible loss of quality control 
B) establishment of a potential competitor in third-country markets 
C) possible improvement of the technology by the local licensee, which then enters the original firm's home market 
D) All of the above are potential disadvantages to licensing. 
A) possible loss of quality control 
B) establishment of a potential competitor in third-country markets 
C) possible improvement of the technology by the local licensee, which then enters the original firm's home market 
D) All of the above are potential disadvantages to licensing.

Question 2

Based on the internationalization process,economists observed that firms tended to invest first in countries that were not too far distant in psychic terms.Close psychic distance defined countries with a cultural,legal,and institutional environment similar to the home country.

Accepted Answer

A) True 
 B)False

Question 3

Of the following,which would NOT be considered a firm-specific risk?

Accepted Answer

A) the risk of getting new management 
B) management policies toward hedging foreign exchange risk 
C) parent company policy toward management of local subsidiaries 
D) All could be considered firm-specific risk. 
A) the risk of getting new management 
B) management policies toward hedging foreign exchange risk 
C) parent company policy toward management of local subsidiaries 
D) All could be considered firm-specific risk.

Question 4

Banks are very hesitant to engage in fronting loans because of the low probability of repayment and thus their risk exposure up to a 100% loss.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is NOT a potential advantage to a cross-border acquisition compared to a Greenfield investment?

Accepted Answer

A) Market imperfections may under-price local assets and allow the purchase of assets at significant discount. 
B) Cross-border acquisitions take longer, thus allowing the firm a better understanding of the local market before attempting sales. 
C) Acquisitions may be a cost-effective way of gaining competitive advantages such as technology or brand names. 
D) All of the above are advantages of acquisition over green field investment. 
A) Market imperfections may under-price local assets and allow the purchase of assets at significant discount. 
B) Cross-border acquisitions take longer, thus allowing the firm a better understanding of the local market before attempting sales. 
C) Acquisitions may be a cost-effective way of gaining competitive advantages such as technology or brand names. 
D) All of the above are advantages of acquisition over green field investment.

Question 6

Which of the following is an advantage to exporting goods to reach international markets rather than entering into some form of FDI?

Accepted Answer

A) fewer agency costs 
B) fewer direct advantages from research and development 
C) a greater risk of losing markets to copycat goods producers 
D) an inability to exploit R&D as effectively as if also invested abroad 
A) fewer agency costs 
B) fewer direct advantages from research and development 
C) a greater risk of losing markets to copycat goods producers 
D) an inability to exploit R&D as effectively as if also invested abroad

Question 7

Which of the following is NOT a form of FDI?

Accepted Answer

A) wholly-owned affiliate 
B) joint venture 
C) exporting 
D) Greenfield investment 
A) wholly-owned affiliate 
B) joint venture 
C) exporting 
D) Greenfield investment

Question 8

Which of the following is NOT a typical characteristic of a fronting loan made to an international subsidiary?

Accepted Answer

A) The parent makes a deposit equal to the size of the desired loan into a large commercial bank. 
B) The bank lends to the subsidiary firm an amount equal to the parent deposit at a slightly higher interest rate. 
C) The lending bank is located in the subsidiary's country. 
D) All of the above are typical characteristics of a fronting loan. 
A) The parent makes a deposit equal to the size of the desired loan into a large commercial bank. 
B) The bank lends to the subsidiary firm an amount equal to the parent deposit at a slightly higher interest rate. 
C) The lending bank is located in the subsidiary's country. 
D) All of the above are typical characteristics of a fronting loan.

Question 9

________ is the risk that the investor will not be able to convert profits,royalties,or fees into dollars.

Accepted Answer

A) Inconvertibility 
B) Expropriation 
C) Business income risk 
D) None of the above 
A) Inconvertibility 
B) Expropriation 
C) Business income risk 
D) None of the above

Question 10

Greenfield investments are typically ________ and ________ than cross-border acquisition.

Accepted Answer

A) slower; more uncertain 
B) faster; of greater certainty 
C) slower; of greater certainty 
D) faster; more uncertain 
A) slower; more uncertain 
B) faster; of greater certainty 
C) slower; of greater certainty 
D) faster; more uncertain

Question 11

An example of economies of scale in financing includes

Accepted Answer

A) being able to access the Euroequity, Eurobond, and Eurocurrency markets. 
B) being able to ship product in shiploads or carloads. 
C) being able to use large-scale plant and equipment. 
D) all of the above. 
A) being able to access the Euroequity, Eurobond, and Eurocurrency markets. 
B) being able to ship product in shiploads or carloads. 
C) being able to use large-scale plant and equipment. 
D) all of the above.

Question 12

The owner-specific advantages of OLI must be ________.

Accepted Answer

A) firm-specific 
B) not easily copied 
C) transferable to foreign subsidiaries 
D) all of the above 
A) firm-specific 
B) not easily copied 
C) transferable to foreign subsidiaries 
D) all of the above

Question 13

Of the following,which was NOT identified by the authors as a type of cultural difference that MNEs must consider when expanding to foreign countries?

Accepted Answer

A) differences in human resource norms 
B) differences in religious heritage 
C) differences in allowable ownership structures 
D) All of the above must be considered. 
A) differences in human resource norms 
B) differences in religious heritage 
C) differences in allowable ownership structures 
D) All of the above must be considered.

Question 14

Which of the following is NOT an advantage to exporting goods to reach international markets rather than entering into some form of FDI?

Accepted Answer

A) fewer political risks 
B) greater agency costs 
C) lower front-end investment 
D) All of the above are advantages. 
A) fewer political risks 
B) greater agency costs 
C) lower front-end investment 
D) All of the above are advantages.

Question 15

________ is the risk that the host government will take specific steps that prevent the foreign affiliate from exercising control over the firm's assets.

Accepted Answer

A) Inconvertibility 
B) Expropriation 
C) Business income risk 
D) None of the above 
A) Inconvertibility 
B) Expropriation 
C) Business income risk 
D) None of the above

Question 16

The O in OLI refers to an advantage in a firm's home market that is ________.

Accepted Answer

A) operator independent 
B) owner-specific 
C) open-market 
D) official designation 
A) operator independent 
B) owner-specific 
C) open-market 
D) official designation

Question 17

Which of the following is NOT a potential disadvantage of licensing relative to FDI?

Accepted Answer

A) possible loss of opportunity to enter the licensee's market with FDI later 
B) risk that technology will be stolen 
C) high agency costs 
D) All of the above are potential disadvantages to licensing. 
A) possible loss of opportunity to enter the licensee's market with FDI later 
B) risk that technology will be stolen 
C) high agency costs 
D) All of the above are potential disadvantages to licensing.

Question 18

Which of the following is NOT an advantage to a joint venture?

Accepted Answer

A) The local partner's reputation enhances access to local financial markets. 
B) The local partner possesses technology that is advantageous in their market and perhaps beyond. 
C) There are higher agency costs than with a purely domestic firm. 
D) The local partner's public image may enhance local sales. 
A) The local partner's reputation enhances access to local financial markets. 
B) The local partner possesses technology that is advantageous in their market and perhaps beyond. 
C) There are higher agency costs than with a purely domestic firm. 
D) The local partner's public image may enhance local sales.

Question 19

What are blocked funds? List and explain two of the three methods the authors list in this chapter for dealing with blocked funds.

Accepted Answer

Blocked funds are those that have been r

Question 20

Which of the following could be considered an example of forced reinvestment if the blockage of funds was expected to be temporary?

Accepted Answer

A) vertical reinvestment by an automobile manufacturer to buy parts suppliers and showrooms 
B) a lumber cutting company subsequently builds a paper mill with blocked funds 
C) purchase of local money market instruments and short-term loans 
D) all of the above 
A) vertical reinvestment by an automobile manufacturer to buy parts suppliers and showrooms 
B) a lumber cutting company subsequently builds a paper mill with blocked funds 
C) purchase of local money market instruments and short-term loans 
D) all of the above

Which of the following is NOT a potential disadvantage of licensing relative to FDI?

Based on the internationalization process,economists observed that firms tended to invest first in countries that were not too far distant in psychic terms.Close psychic distance defined countries with a cultural,legal,and institutional environment similar to the home country.

Of the following,which would NOT be considered a firm-specific risk?

Banks are very hesitant to engage in fronting loans because of the low probability of repayment and thus their risk exposure up to a 100% loss.

Which of the following is NOT a potential advantage to a cross-border acquisition compared to a Greenfield investment?

Which of the following is an advantage to exporting goods to reach international markets rather than entering into some form of FDI?

Which of the following is NOT a form of FDI?

Which of the following is NOT a typical characteristic of a fronting loan made to an international subsidiary?

________ is the risk that the investor will not be able to convert profits,royalties,or fees into dollars.

Greenfield investments are typically and than cross-border acquisition.

An example of economies of scale in financing includes

The owner-specific advantages of OLI must be ________.

Of the following,which was NOT identified by the authors as a type of cultural difference that MNEs must consider when expanding to foreign countries?

Which of the following is NOT an advantage to exporting goods to reach international markets rather than entering into some form of FDI?

________ is the risk that the host government will take specific steps that prevent the foreign affiliate from exercising control over the firm's assets.

The O in OLI refers to an advantage in a firm's home market that is ________.

Which of the following is NOT a potential disadvantage of licensing relative to FDI?

Which of the following is NOT an advantage to a joint venture?

What are blocked funds? List and explain two of the three methods the authors list in this chapter for dealing with blocked funds.

Which of the following could be considered an example of forced reinvestment if the blockage of funds was expected to be temporary?

Current Multinational Challenges and the Global Economy

Financial Goals and Corporate Governance

The International Monetary System

The Balance of Payments

Current Multinational Financial Challenges: the Credit Crisis of 2007 - 2009

The Foreign Exchange Market

International Parity Conditions

Foreign Currency Derivatives and Swaps

Foreign Exchange Rate Determination and Forecasting

Transaction and Translation Exposure

Operating Exposure

The Global Cost and Availability of Capital

Sourcing Equity and Debt Globally

Multinational Tax Management

Multinational Capital Budgeting and Cross-Border Acquisitions

International Portfolio Theory and Diversification

Working Capital Management

International Trade Finance

Filters

Exam 15: Foreign Direct Investment and Political Risk

Which of the following is NOT a potential disadvantage of licensing relative to FDI?

Based on the internationalization process,economists observed that firms tended to invest first in countries that were not too far distant in psychic terms.Close psychic distance defined countries with a cultural,legal,and institutional environment similar to the home country.

Of the following,which would NOT be considered a firm-specific risk?

Banks are very hesitant to engage in fronting loans because of the low probability of repayment and thus their risk exposure up to a 100% loss.

Which of the following is NOT a potential advantage to a cross-border acquisition compared to a Greenfield investment?

Which of the following is an advantage to exporting goods to reach international markets rather than entering into some form of FDI?

Which of the following is NOT a form of FDI?

Which of the following is NOT a typical characteristic of a fronting loan made to an international subsidiary?

________ is the risk that the investor will not be able to convert profits,royalties,or fees into dollars.

Greenfield investments are typically ________ and ________ than cross-border acquisition.

An example of economies of scale in financing includes

The owner-specific advantages of OLI must be ________.

Of the following,which was NOT identified by the authors as a type of cultural difference that MNEs must consider when expanding to foreign countries?

Which of the following is NOT an advantage to exporting goods to reach international markets rather than entering into some form of FDI?

________ is the risk that the host government will take specific steps that prevent the foreign affiliate from exercising control over the firm's assets.

The O in OLI refers to an advantage in a firm's home market that is ________.

Which of the following is NOT a potential disadvantage of licensing relative to FDI?

Which of the following is NOT an advantage to a joint venture?

What are blocked funds? List and explain two of the three methods the authors list in this chapter for dealing with blocked funds.

Which of the following could be considered an example of forced reinvestment if the blockage of funds was expected to be temporary?

Current Multinational Challenges and the Global Economy

Financial Goals and Corporate Governance

The International Monetary System

The Balance of Payments

Current Multinational Financial Challenges: the Credit Crisis of 2007 - 2009

The Foreign Exchange Market

International Parity Conditions

Foreign Currency Derivatives and Swaps

Foreign Exchange Rate Determination and Forecasting

Transaction and Translation Exposure

Operating Exposure

The Global Cost and Availability of Capital

Sourcing Equity and Debt Globally

Multinational Tax Management

Multinational Capital Budgeting and Cross-Border Acquisitions

International Portfolio Theory and Diversification

Working Capital Management

International Trade Finance

Filters

Greenfield investments are typically and than cross-border acquisition.