89) ________ is essentially the service-industry version of licensing, although it normally involves
much longer-term commitments.
A) Franchising
B) Subsidizing
C) Greenfield investment
D) Patenting
90) From the perspective of a firm negotiating the terms of an investment with a host government,
the firm’s bargaining power is high when the
A) firm has a short time in which to complete the negotiations.
B) host government places a high value on what the firm has to offer.
C) number of comparable alternatives open to the firm is low.
D) host government does not places a high value on the firm’s offering.
91) The ________ and Knickerbocker’s theory of FDI tend to be less useful from a business
perspective because they are descriptive rather than analytical.
A) noninterventionist theory
B) internalization theory
C) eclectic paradigm
D) product life-cycle theory
92) As transportation costs or trade barriers increase, exporting becomes unprofitable, and the
choice is between FDI and
A) subsidies.
B) incentives.
C) licensing.
D) resource endowments.
93) Licensing would be a good option for firms in which of the following industries?
A) It would be a good option in high-technology industries in which protecting firm-specific
expertise is of paramount importance.
B) It would be a good option in global oligopolies, in which competitive interdependence requires
that multinational firms maintain tight control over foreign operations.
C) It would be a good option in industries in which intense cost pressures require that multinational
firms maintain tight control over foreign operations.
D) It would be a good option in fragmented, low-technology industries in which globally dispersed
manufacturing is not an option.
94) Discuss the two main forms of FDI.
95) Discuss the trends in FDI over the past 30 years. Be sure to differentiate between the stock of
FDI and the flow of FDI.
96) Discuss the reasons for the growth in FDI over the past 30 years.
97) What is a greenfield investment? How does it compare to an acquisition? Which form of FDI is
a firm more likely to choose? Explain your answer.
98) Discuss why firms selling products with low value–to-weight ratios choose FDI over
exporting.
99) What are the major drawbacks of licensing according to the internalization theory?
100) What is an oligopoly? Discuss the impact of interdependence in an oligopoly.
101) Why do many economists favor internalization theory as an explanation for FDI compared to
Knickerbocker’s theory?
102) Discuss an example that substantiates Dunning’s argument about location-specific
advantages.
103) Discuss the benefits and costs of FDI from the perspective of a host country and from the
perspective of the home country.
104) What are the possible adverse effects of FDI on a host country‘s balance–of-payments
position?
105) Describe some home-country policies that encourage outward FDI.
106) What are the ways in which host governments restrict inward FDI?
107) Describe the situations when licensing is not a good option for a firm.
108) When a firm is considering FDI, what are some of the negotiating points it must weigh before
making its decision?