International Business, 12e (Hill)
1) The amount of foreign direct investment (FDI) undertaken over a given time period is known as
the flow of FDI.
2) FDI has been declining in the last few decades because protectionist pressures have become less
intense.
3) Mergers and acquisitions are quicker to execute than greenfield investments.
4) Licensing involves the establishment of a new operation in a foreign country.
5) By placing tariffs on imported goods, governments can increase the cost of exporting relative to
foreign direct investment and licensing.
6) An oligopoly is an industry composed of a limited number of large firms.
7) Rivals rarely imitate what a firm does in an oligopoly.
8) John Dunning pioneered the eclectic paradigm.
9) According to the pragmatic nationalistic view, the MNE is a tool for exploiting host countries to
the exclusive benefit of their capitalist–imperialist home countries.
10) Only a few countries have adopted the free market view in its pure form.
11) Countries adopting a pragmatic stance pursue policies designed to maximize the national
benefits and minimize the national costs.
12) Research supports the view that multinational firms often transfer significant technology when
they invest in a foreign country.
13) Direct effects of FDI arise when jobs are created in local suppliers as a result of the FDI and
when jobs are created because of increased local spending by employees of the MNE.
14) Governments normally are concerned when their country is running a surplus on the current
account of their balance of payments.
15) In general, FDI in the form of greenfield investments should increase competition.
16) For the home country, the current account of the balance of payments improves if the purpose
of the foreign investment is to serve the home market from a low-cost production location.
17) Offshore production refers to FDI undertaken to serve the host market.
18) The WTO supports the promotion of international trade in services.
19) One way countries have encouraged firms to undertake FDI is through double taxation.
20) The British advanced corporation tax system taxed British companies’ foreign earnings at a
higher rate than their domestic earnings. This tax code created an incentive for British companies
to invest abroad.
21) Tax concessions, low-interest loans, and grants or subsidies are all incentives that governments
offer to foreign firms to invest in their countries.
22) Because licensing is more costly and more risky than FDI, other things being equal, the
theories argue that FDI is preferable to licensing.
23) Licensing is usually a good option for firms in high-tech industries where protecting
firm-specific expertise is of paramount importance.
24) FDI occurs when a firm
A) ships its products from one country to another.
B) invests directly in facilities to produce a product in a foreign country.
C) invests in the shares of another company operating in the same country.
D) grants permission to another company in a different country to use its brand name.
25) Which of the following is an example of a greenfield investment?
A) A Chinese sugar maker sets up a sugar crushing facility in Cuba.
B) A Serbian automobile company purchases a Croatian component manufacturer.
C) A Finnish mobile phone manufacturer expands its production facility in Finland.
D) An Indian oil exploration company acquires an oil refining company.
26) Which of the following statements is true about the growth of foreign direct investment in the
world economy over the last few decades?
A) FDI has experienced a slower growth than world output.
B) FDI has accelerated faster than world trade growth.
C) FDI has remained the same over the past few decades.
D) FDI has dropped dramatically.
27) The majority of cross-border investment in the developed world is in the form of
A) hostile takeovers.
B) greenfield investments.
C) competitive investments.
D) mergers and acquisitions.
28) An Italian car manufacturer purchases a U.S. producer of car tires. This is an example of
A) an acquisition.
B) an absolute advantage.
C) a greenfield investment.
D) a merger.