Question 1

Which of the following is NOT a factor of Porter's "diamond of national advantage"?

Accepted Answer

A) Factor conditions. 
B) Demand conditions. 
C) Related and supporting industries. 
D) All of the above are factors of the diamond of national advantage. 
A) Factor conditions. 
B) Demand conditions. 
C) Related and supporting industries. 
D) All of the above are factors of the diamond of national advantage.

Question 2

The L in OLI refers to an advantage in a firm's home market that is a

Accepted Answer

A) liability in the domestic market. 
B) location-specific advantage. 
C) longevity in a particular market. 
D) none of the above 
A) liability in the domestic market. 
B) location-specific advantage. 
C) longevity in a particular market. 
D) none of the above

Question 3

Terrorism, cyber attacks, and the anti-globalization movement are each examples of ________ risks.

Accepted Answer

A) firm-specific 
B) country-specific 
C) institutional 
D) global-specific 
A) firm-specific 
B) country-specific 
C) institutional 
D) global-specific

Question 4

According to your authors, MNEs can anticipate government regulations that are discriminatory or wealth depriving from a ________ or ________ level view.

Accepted Answer

A) foreign; domestic 
B) micro; macro 
C) internal; external 
D) local; global 
A) foreign; domestic 
B) micro; macro 
C) internal; external 
D) local; global

Question 5

With licensing the ________ is likely to be lower than with FDI because of lower profits; however, the ________ is likely to be higher due to a greater return per dollar invested.

Accepted Answer

A) IRR; NPV 
B) NPV; IRR 
C) cost of capital; NPV 
D) IRR; cost of capital 
A) IRR; NPV 
B) NPV; IRR 
C) cost of capital; NPV 
D) IRR; cost of capital

Question 6

A/n ________ would be an example of an internalization advantage for an MNE.

Accepted Answer

A) patent 
B) economy of scale 
C) unique source of raw materials 
D) possession of proprietary information 
A) patent 
B) economy of scale 
C) unique source of raw materials 
D) possession of proprietary information

Question 7

Which of the following is NOT true regarding behavioral observations of firms making a decision to invest internationally?

Accepted Answer

A) MNEs initially invest in countries with a similar "national psychic." 
B) Firms eventually take greater risks in terms of the national psychic of countries in which they invest. 
C) Initial investments tend to be much larger than subsequent ones. 
D) All of the above have been observed. 
A) MNEs initially invest in countries with a similar "national psychic." 
B) Firms eventually take greater risks in terms of the national psychic of countries in which they invest. 
C) Initial investments tend to be much larger than subsequent ones. 
D) All of the above have been observed.

Question 8

Local partners in a foreign country and in a joint venture with an MNE are likely to make decisions that maximize the value of the subsidiary. Such actions probably will not maximize the value of the entire firm.

Accepted Answer

A) True 
 B)False

Question 9

An example of economies of scale in financing include

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 10

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 11

What does the OLI Paradigm propose to explain? Define each component and provide an example of each.

Accepted Answer

The OLI Paradigm is an attempt to develo

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

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 14

A country can react to the potential for blocked funds prior to making an investment, during operations, or by investing in the local country in assets than maintain their value.

Accepted Answer

A) True 
 B)False

Question 15

OPIC stands for

Accepted Answer

A) Organization for the Prevention of Insufficient Capitalization. 
B) Organization of Petroleum Importing Countries. 
C) Overseas Private Investment Corporation. 
D) Overseas Public Insurance Commission. 
A) Organization for the Prevention of Insufficient Capitalization. 
B) Organization of Petroleum Importing Countries. 
C) Overseas Private Investment Corporation. 
D) Overseas Public Insurance Commission.

Question 16

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 17

All of the following may be justification for a strategic alliance EXCEPT:

Accepted Answer

A) takeover defense. 
B) a joint venture to pool resources for research and development. 
C) joint marketing and serving agreements. 
D) All of the above are legitimate reasons for strategic alliances. 
A) takeover defense. 
B) a joint venture to pool resources for research and development. 
C) joint marketing and serving agreements. 
D) All of the above are legitimate reasons for strategic alliances.

Question 18

An alternative strategy to engaging in bribery in international investments include:

Accepted Answer

A) Refuse bribery outright. 
B) Retain local advisors to diffuse requests for bribes. 
C) Educate management and local employees about the firm's bribery policy. 
D) all of the above 
A) Refuse bribery outright. 
B) Retain local advisors to diffuse requests for bribes. 
C) Educate management and local employees about the firm's bribery policy. 
D) all of the above

Question 19

Which of the following is the motivation for making foreign direct investment?

Accepted Answer

A) Knowledge seeking. 
B) Market seeking. 
C) Raw material seeking. 
D) all of the above 
A) Knowledge seeking. 
B) Market seeking. 
C) Raw material seeking. 
D) all of the above

Question 20

A ________ is a shared ownership in a foreign business.

Accepted Answer

A) licensing agreement 
B) greenfield investment 
C) joint venture 
D) wholly-owned affiliate 
A) licensing agreement 
B) greenfield investment 
C) joint venture 
D) wholly-owned affiliate

Exam 18: Foreign Direct Investment Theory and Political Risk

Which of the following is NOT a factor of Porter's "diamond of national advantage"?

The L in OLI refers to an advantage in a firm's home market that is a

Terrorism, cyber attacks, and the anti-globalization movement are each examples of ________ risks.

According to your authors, MNEs can anticipate government regulations that are discriminatory or wealth depriving from a ________ or ________ level view.

With licensing the ________ is likely to be lower than with FDI because of lower profits; however, the ________ is likely to be higher due to a greater return per dollar invested.

A/n ________ would be an example of an internalization advantage for an MNE.

Which of the following is NOT true regarding behavioral observations of firms making a decision to invest internationally?

Local partners in a foreign country and in a joint venture with an MNE are likely to make decisions that maximize the value of the subsidiary. Such actions probably will not maximize the value of the entire firm.

An example of economies of scale in financing include

Which of the following is NOT a form of FDI?

What does the OLI Paradigm propose to explain? Define each component and provide an example of each.

The owner-specific advantages of OLI must be ________.

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.

A country can react to the potential for blocked funds prior to making an investment, during operations, or by investing in the local country in assets than maintain their value.

OPIC stands for

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

All of the following may be justification for a strategic alliance EXCEPT:

An alternative strategy to engaging in bribery in international investments include:

Which of the following is the motivation for making foreign direct investment?

A ________ is a shared ownership in a foreign business.

Globalization and the Multinational Enterprise

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

Interest Rate and Currency Swaps

Foreign Exchange Rate Determination and Forecasting

Transaction Exposure

Operating Exposure

Translation Exposure

The Global Cost and Availability of Capital

Sourcing Equity Globally

Sourcing Debt Globally

International Portfolio Theory and Diversification

Multinational Capital Budgeting

Multinational Tax Management

Working Capital Management

International Trade Finance

Filters

According to your authors, MNEs can anticipate government regulations that are discriminatory or wealth depriving from a or level view.

With licensing the is likely to be lower than with FDI because of lower profits; however, the is likely to be higher due to a greater return per dollar invested.