QUESTION Offshore production refers to FDI undertaken to serve the host market. Indicate whether the statement is true or false. ANSWER FALSE International trade theory tells us that home-country concerns about the negative economic effects of offshore production may be misplaced. The term offshore production refers to FDI undertaken to serve the home market.
QUESTION Why has FDI grown more rapidly than world trade? A. The decline in trade barriers has erased the fear of protectionist pressures. B. Executives of business firms see FDI as a way of circumventing future trade barriers. C. There has been a general shift toward radical and totalitarian political institutions. D. Privatization has made […]
QUESTION Licensing is not a good option if the competitive advantage of a firm is based upon managerial or marketing knowledge that is embedded in the routines of the firm or the skills of its managers, and that is difficult to codify in a “book of blueprints Indicate whether the statement is true or false. […]
QUESTION The location-specific advantages argument associated with John Dunning helps explain why firms prefer FDI to licensing or to exporting. Indicate whether the statement is true or false. ANSWER FALSE The implications of the theories of FDI for business practice are straightforward. First, the location-specific advantages argument associated with John Dunning does help explain […]
QUESTION The WTO embraces the promotion of international trade in services. Indicate whether the statement is true or false. ANSWER TRUE The WTO embraces the promotion of international trade in services. Because many services have to be produced where they are sold, exporting is not an option. Given this, the WTO has become involved […]
QUESTION Performance requirements are controls over the behavior of the MNE’s local subsidiary. Indicate whether the statement is true or false. ANSWER TRUE Performance requirements can also take several forms. Performance requirements are controls over the behavior of the MNE’s local subsidiary. The most common performance requirements are related to local content, exports, technology […]
QUESTION Ownership restraints and performance requirements are the two most common ways in which host governments restrict FDI. Indicate whether the statement is true or false. ANSWER TRUE Host governments use a wide range of controls to restrict FDI in one way or another. The two most common are ownership restraints and performance requirements.
QUESTION A computer manufacturing firm from the United States invests in a microprocessor manufacturing plant in Taiwan. This is an example of: A. insourcing. B. stock consolidation. C. foreign direct investment. D. product differentiation. E. market segmentation. ANSWER C
QUESTION Franchising is essentially the service-industry version of licensing, although it normally involves much longer-term commitments than licensing. Indicate whether the statement is true or false. ANSWER TRUE Franchising is essentially the service-industry version of licensing, although it normally involves much longer-term commitments than licensing. With franchising, the firm licenses its brand name to […]
QUESTION A firm’s bargaining power is low when the host government places a low value on what the firm has to offer. Indicate whether the statement is true or false. ANSWER TRUE From the perspective of a firm negotiating the terms of an investment with a host government, the firm’s bargaining power is high […]
