Question 1

A joint venture is a company owned by one parent company.

Accepted Answer

A joint venture is a company owned by two or more parent companies.

Question 2

Horizontal FDI is when a firm moves upstream or downstream in different value chain stages in a host country.

Accepted Answer

Horizontal FDI occurs when a firm duplicates its home country-based activities at the same value chain stage in a host country, rather than moving upstream or downstream.

Question 3

An FDI in which type of activity would be an example of upstream vertical FDI?&#10;A)A sales and marketing office&#10;B)A replication of the operation in the home country&#10;C)An operation covering all stages of the value chain&#10;D)A manufacturing facility for components of the firm's main product

Accepted Answer

Upstream vertical FDI involves investing in activities that come before the production process of the final product. A manufacturing facility for components of the firm's main product fits this description as it involves producing components that are needed further up the value chain in the production process.

Question 4

Which statement holds true about state-owned enterprises?&#10;A)The majority of big multinational enterprises from EU countries are in state ownership&#10;B)Sovereign wealth funds are the only important form of state-owned enterprises that invest abroad directly&#10;C)State-owned enterprises from non-EU countries are not allowed to invest in the EU&#10;D)State-owned enterprises play an important role in FDI from emerging economies

Accepted Answer

State-owned enterprises from emerging economies such as China have become an important source of foreign direct investment (FDI) in recent years. These enterprises often have access to large amounts of capital and prioritize strategic investments that align with their government's economic and political goals. As a result, they have invested heavily in sectors such as infrastructure, energy, and natural resources across the world.

Question 5

Assets specificity refers to investments that are:&#10;A)Specific to a business relationship&#10;B)Specific to a business function&#10;C)Specific to a country&#10;D)Specific to a product division

Accepted Answer

Asset specificity refers to investments that are specific to a business relationship, such as custom-made equipment designed to meet the unique needs of a particular customer or supplier. This type of asset cannot easily be redeployed to other relationships, making it a specific investment for that particular business relationship.

Question 6

Reduced contract monitoring and enforcement costs are an example of an internalization advantage.

Accepted Answer

Internalization advantages refer to the benefits a firm can achieve by integrating activities within its boundaries instead of relying on external markets. Reduced contract monitoring and enforcement costs are an example of such advantages as the firm can control the quality and performance of the activities, thus reducing the need for external monitoring and enforcement.

Question 7

The expectation of knowledge spillovers is a major motivation for governments to attract foreign investors to their country.

Accepted Answer

Knowledge spillovers occur when foreign investors bring new technologies, processes, and knowledge to the host country, which can benefit domestic firms and lead to innovation and economic growth. Therefore, many governments offer incentives and favorable policies to attract foreign investment to their countries in the hope of benefiting from such knowledge spillovers.

Question 8

Foreign portfolio investment (FPI)is a special case of foreign direct investment (FDI).

Accepted Answer

FPI and FDI are two different forms of investment. FPI refers to investments made in financial assets such as stocks, bonds, and mutual funds, while FDI refers to investments made in physical assets such as factories, property, and equipment. FDI involves a more significant and long-term commitment to the foreign market, while FPI is typically more short-term and subject to fluctuations in the financial markets.

Question 9

Multinational companies concerned about dissemination risk prefer to establish a licencing contract instead of a wholly owned subsidiary.

Accepted Answer

The answer of Multinational companies concerned about dissemination risk prefer...

Question 10

The shift in the relative bargaining power between MNEs and host governments after the foreign investor incurred the sunk costs of their initial investment is known as:&#10;A)Obsolescing bargain&#10;B)Resurgent bargain&#10;C)Empowered negotiation&#10;D)Resurgent negotiation

Accepted Answer

The shift in bargaining power after sunk costs are incurred by the foreign investor is referred to as obsolescing bargain. This is because the host government's bargaining power may increase as the MNE may be less willing to exit the market due to the sunk costs they have already incurred.

Question 11

Location-bound resources are resources that cannot be transferred from one country to another.

Accepted Answer

The answer of Location-bound resources are resources that cannot be...

Question 12

A multinational enterprise is defined as an enterprise that:&#10;A)Has sales in more than one country&#10;B)Has employees from more than one country&#10;C)Has subsidiaries in more than one country&#10;D)Is buying components in more than one country

Accepted Answer

The answer of A multinational enterprise is defined as an...

Question 13

What is the relationship between the stock and flow of FDI?&#10;A)FDI flows are generated from FDI stock&#10;B)Changes in FDI stock correspond to changes in FDI flows&#10;C)FDI stock adds to FDI flows&#10;D)FDI flows add to the FDI stock

Accepted Answer

The answer of What is the relationship between the stock...

Question 14

Which of the following is not an element of the OLI paradigm?&#10;A)Locational advantages&#10;B)Ownership advantages&#10;C)Internalization advantages&#10;D)All of the above answers are elements of the OLI paradigm.

Accepted Answer

The answer of Which of the following is not an...

Deck 5: Trading Internationally