Question 1

Which of the following is a home-country policy aimed at limiting outward FDI flow?

Accepted Answer

A)  Taxing domestic companies' foreign earnings at a higher rate than their domestic earnings 
B)  Implementation of government-backed insurance programs to cover major types of foreign investment risk 
C)  Eliminating double taxation of foreign income 
D)  Persuading host countries to relax their restrictions on inbound FDI 
A)  Taxing domestic companies' foreign earnings at a higher rate than their domestic earnings 
B)  Implementation of government-backed insurance programs to cover major types of foreign investment risk 
C)  Eliminating double taxation of foreign income 
D)  Persuading host countries to relax their restrictions on inbound FDI

Question 2

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.

Accepted Answer

A) True 
 B)False

Question 3

According to Knickerbocker's theory:

Accepted Answer

A)  when a firm has valuable know-how that cannot be adequately protected by a licensing contract it engages in FDI. 
B)  when a firm's skills and know-how are not amenable to licensing,it usually prefers the FDI route. 
C)  by placing tariffs on imported goods,governments indirectly increase the cost of exporting relative to foreign direct investment and licensing. 
D)  when a firm that is part of an oligopolistic industry expands into a foreign market,other firms in the industry will be compelled to make similar investments. 
A)  when a firm has valuable know-how that cannot be adequately protected by a licensing contract it engages in FDI. 
B)  when a firm's skills and know-how are not amenable to licensing,it usually prefers the FDI route. 
C)  by placing tariffs on imported goods,governments indirectly increase the cost of exporting relative to foreign direct investment and licensing. 
D)  when a firm that is part of an oligopolistic industry expands into a foreign market,other firms in the industry will be compelled to make similar investments.

Question 4

Internalization theory seeks to explain why firms often prefer foreign direct investment over licensing as a strategy for entering foreign markets.

Accepted Answer

A) True 
 B)False

Question 5

Developing nations currently account for the largest share of FDI inflows.

Accepted Answer

A) True 
 B)False

Question 6

Discuss why firms selling products with low value-to-weight ratios choose FDI over exporting.

Accepted Answer

Products with low value-to-weight ratios

Question 7

Licensing is usually a good option for firms in high-tech industries where protecting firm-specific expertise is of paramount importance.

Accepted Answer

A) True 
 B)False

Question 8

Describe the situations when licensing is not a good option for a firm.

Accepted Answer

Licensing is not a good option in three

Question 9

Why is it said that not all the new jobs created by FDI represent net additions in employment?

Accepted Answer

A)  Because of the uncertainty of the overall economic environment 
B)  Because most of the job creation is indirect in nature 
C)  Because jobs created by an investment may be offset by the jobs lost in domestic companies 
D)  Because the unemployment rate more or less remains constant over the short-term 
A)  Because of the uncertainty of the overall economic environment 
B)  Because most of the job creation is indirect in nature 
C)  Because jobs created by an investment may be offset by the jobs lost in domestic companies 
D)  Because the unemployment rate more or less remains constant over the short-term

Question 10

The radical view traces its roots to Marxist political and economic theory.

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

Although Knickerbocker's theory and its

Question 12

Host country citizens that are employed by an MNE following an FDI are an example of an indirect effect of FDI.

Accepted Answer

A) True 
 B)False

Question 13

How is the adverse effect of the balance of payments for the home country due to an FDI usually offset?

Accepted Answer

A)  By increased imports to the home country as a result of the FDI 
B)  By the subsequent inflow of foreign earnings 
C)  By substituting direct exports made earlier from the home country 
D)  By further investments usually made to expand foreign operations 
A)  By increased imports to the home country as a result of the FDI 
B)  By the subsequent inflow of foreign earnings 
C)  By substituting direct exports made earlier from the home country 
D)  By further investments usually made to expand foreign operations

Question 14

An oligopoly is an industry composed of a limited number of large firms.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following specifically reduces the viability of an exporting strategy specifically for products with low value-to-weight ratios?

Accepted Answer

A)  Foreign exchange controls 
B)  Trade barriers 
C)  Transportation costs 
D)  Output quality 
A)  Foreign exchange controls 
B)  Trade barriers 
C)  Transportation costs 
D)  Output quality

Question 16

_____ is essentially the service-industry version of licensing,although it normally involves much longer term commitments.

Accepted Answer

A)  Franchising 
B)  Subsidizing 
C)  Greenfield investment 
D)  Patenting 
A)  Franchising 
B)  Subsidizing 
C)  Greenfield investment 
D)  Patenting

Question 17

In which of the following situations does the internalization theory recommend FDI as opposed to licensing?

Accepted Answer

A)  When the firm has know-how that can be adequately protected by a licensing contract 
B)  When the firm produces products that have a low value-to-weight ratio 
C)  When a firm's skills and know-how are amenable to licensing 
D)  When the firm needs tight control over a foreign entity 
A)  When the firm has know-how that can be adequately protected by a licensing contract 
B)  When the firm produces products that have a low value-to-weight ratio 
C)  When a firm's skills and know-how are amenable to licensing 
D)  When the firm needs tight control over a foreign entity

Question 18

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

Accepted Answer

A)  From cash outflow during the initial investment to finance the FDI 
B)  If the purpose of the foreign investment is to serve the home market from a low-cost production location 
C)  From the inward flow of foreign earnings 
D)  If FDI is a substitute for direct exports 
A)  From cash outflow during the initial investment to finance the FDI 
B)  If the purpose of the foreign investment is to serve the home market from a low-cost production location 
C)  From the inward flow of foreign earnings 
D)  If FDI is a substitute for direct exports

Question 19

FDI does not benefit the host country's balance of payments if the foreign subsidiary creates demand for home-country exports of capital equipment,intermediate goods,or complementary products.

Accepted Answer

A) True 
 B)False

Question 20

The _____ of FDI refers to the amount of FDI undertaken over a year.

Accepted Answer

A)  stock 
B)  net value 
C)  accumulated value 
D)  flow 
A)  stock 
B)  net value 
C)  accumulated value 
D)  flow

Which of the following is a home-country policy aimed at limiting outward FDI flow?

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.

According to Knickerbocker's theory:

Internalization theory seeks to explain why firms often prefer foreign direct investment over licensing as a strategy for entering foreign markets.

Developing nations currently account for the largest share of FDI inflows.

Discuss why firms selling products with low value-to-weight ratios choose FDI over exporting.

Licensing is usually a good option for firms in high-tech industries where protecting firm-specific expertise is of paramount importance.

Describe the situations when licensing is not a good option for a firm.

Why is it said that not all the new jobs created by FDI represent net additions in employment?

The radical view traces its roots to Marxist political and economic theory.

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

Host country citizens that are employed by an MNE following an FDI are an example of an indirect effect of FDI.

How is the adverse effect of the balance of payments for the home country due to an FDI usually offset?

An oligopoly is an industry composed of a limited number of large firms.

Which of the following specifically reduces the viability of an exporting strategy specifically for products with low value-to-weight ratios?

_____ is essentially the service-industry version of licensing,although it normally involves much longer term commitments.

In which of the following situations does the internalization theory recommend FDI as opposed to licensing?

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

FDI does not benefit the host country's balance of payments if the foreign subsidiary creates demand for home-country exports of capital equipment,intermediate goods,or complementary products.

The _____ of FDI refers to the amount of FDI undertaken over a year.

Globalization

National Differences in Political Economy

Political Economy and Economic Development

Differences in Culture

Ethics in International Business

International Trade Theory

The Political Economy of International Trade

Regional Economic Integration

The Foreign Exchange Market

The International Monetary System

The Global Capital Market

The Strategy of International Business

The Organization of International Business

Entry Strategy and Strategic Alliances

Exporting, Importing, and Countertrade

Global Production, Outsourcing, and Logistics

Global Marketing and RD

Global Human Resource Management

Accounting and Finance in the International Business

Filters

Exam 8: Foreign Direct Investment

Which of the following is a home-country policy aimed at limiting outward FDI flow?

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.

According to Knickerbocker's theory:

Internalization theory seeks to explain why firms often prefer foreign direct investment over licensing as a strategy for entering foreign markets.

Developing nations currently account for the largest share of FDI inflows.

Discuss why firms selling products with low value-to-weight ratios choose FDI over exporting.

Licensing is usually a good option for firms in high-tech industries where protecting firm-specific expertise is of paramount importance.

Describe the situations when licensing is not a good option for a firm.

Why is it said that not all the new jobs created by FDI represent net additions in employment?

The radical view traces its roots to Marxist political and economic theory.

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

Host country citizens that are employed by an MNE following an FDI are an example of an indirect effect of FDI.

How is the adverse effect of the balance of payments for the home country due to an FDI usually offset?

An oligopoly is an industry composed of a limited number of large firms.

Which of the following specifically reduces the viability of an exporting strategy specifically for products with low value-to-weight ratios?

_____ is essentially the service-industry version of licensing,although it normally involves much longer term commitments.

In which of the following situations does the internalization theory recommend FDI as opposed to licensing?

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

FDI does not benefit the host country's balance of payments if the foreign subsidiary creates demand for home-country exports of capital equipment,intermediate goods,or complementary products.

The _____ of FDI refers to the amount of FDI undertaken over a year.

Globalization

National Differences in Political Economy

Political Economy and Economic Development

Differences in Culture

Ethics in International Business

International Trade Theory

The Political Economy of International Trade

Regional Economic Integration

The Foreign Exchange Market

The International Monetary System

The Global Capital Market

The Strategy of International Business

The Organization of International Business

Entry Strategy and Strategic Alliances

Exporting, Importing, and Countertrade

Global Production, Outsourcing, and Logistics

Global Marketing and RD

Global Human Resource Management

Accounting and Finance in the International Business

Filters