Exam 8: Foreign Direct Investment

What are the major drawbacks of licensing according to the internalization theory?

Which of the following factors has had a positive effect on the volume of foreign trade investments?

Why do many economists favor internalization theory as an explanation for FDI compared to Knickerbocker's theory?

FDI undertaken to serve the home market is known as:

The stock of FDI is:

If the FDI is a substitute for imports of goods or services, the effect can be to improve the current account of the host country's balance of payments.

By placing tariffs on imported goods, governments can increase the cost of exporting relative to foreign direct investment and licensing.

In which way can the source country's balance of payments benefit from an FDI made in a foreign country?

Which political view allows FDI so long as the benefits outweigh the costs?

As transportation costs or trade barriers increase, exporting becomes unprofitable, compared to FDI and licensing.

What are the ways in which host governments restrict inward FDI?

Discuss the two main forms of FDI.

Rivals rarely imitate what a firm does in an oligopoly.

In general, FDI in the form of greenfield investments should increase competition.

What is double taxation in the context of FDI?

Advantages that arise from using resource endowments or assets that are tied to a particular place and that a firm finds valuable to combine with its own unique assets are known as:

How can FDI undertaken to serve the home market stimulate economic growth in the home country?

In practice only a few countries country have adopted the free market view in its pure form.

Licensing gives a firm tight control over manufacturing, marketing, and strategy in a foreign country that may be required to maximize its profitability.

When transportation costs are added to production costs, it becomes unprofitable to ship some products over a large distance. This is particularly true of products that have a high value-to-weight ratio.