Exam 18: Foreign Direct Investment Theory and Political Risk

MNEs typically used licensing with independent firms rather than with their own foreign subsidiaries.

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

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

________ is the ability to exercise effective control over a foreign subsidiary within a country's legal and political environment.

Joint ventures are a more common FDI than wholly owned subsidiaries.

Business risk can be measured through sensitivity analysis but from only the project viewpoint.

The OLI paradigm is an attempt to create a framework to explain why MNEs choose ________ rather than some other form of international venture.

The speed at which inventory moves through a manufacturing process is known as ________.

________ is a type of political risk that OPIC does NOT cover.

Licensing is a popular form of foreign investment because it does not need a sizable commitment of funds, and political risk is often minimized.

A ________ loan, also known as ________ is a parent-to-affiliate loan channeled through a financial intermediary such as a large commercial bank.

As a result of the terrorist attacks of September 11, 2001, many firms have employed a wide range of tactics to ensure continued flow of inventory in the face of government steps to curb terrorism. Which of the following is an inventory sourcing strategy response (as opposed to an inventory management response, or a transportation response)?

A number of institutional services provide updated country risk ratings on a regular basis. This is an example of micro-risk information for MNEs using this data.

When faced with additional risk from a foreign investment, firms typically account for the additional risk by adjusting the discount rates or by adjusting cash flows.

Which of the following is NOT an example of a country-specific risk?

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 a typical characteristic of a fronting loan made to an international subsidiary?

Governance risk due to goal conflict between an MNE and its host government is the main political ________ risk.

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

Many problems such as poverty, environmental concerns, and cyber attacks are beyond the capabilities of MNEs alone to correct and require government participation as well.