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Chapter 10
Multinational Corporations and Global Production
Multiple-Choice
1) Firms engage in vertical integration
a) to internalize different stages of the production process within the
firm.
b) to get behind trade barriers of other countries.
c) to compete more effectively with local firms through their
subsidiaries.
d) to defend or increase their market share.
2) Transfer prices are prices that
a) MNCs charge for the sale of goods and services to other MNCs.
b) MNC affiliates charge for the internal sales of goods and services.
c) MNCs charge for the sale of goods and services to host states.
d) MNCs transfer on to the consumer.
3) The G7 country with the lowest level of inward FDI stock as a share of its
GDP is
a) Italy.
b) the United States.
c) France
d) Japan.
4) During the last decade, most growth in foreign direct investment has been
through
a) greenfield investment.
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b) acquisitions.
c) mergers.
d) joint ventures.
5) To qualify as FDI (investment with a degree of control), the U.S.
Department of Commerce and the IMF indicate that a firm must have an
equity ownership stake of at least
a) 50 percent.
b) 25 percent.
c) 10 percent.
d) 7 percent.
6) Which theorists are most likely to have a positive view of corporate social
responsibility
a) interventionist liberals such as Jagdish Bhagwati.
b) neomercantilists.
c) historical materialists.
d) orthodox liberals such as Milton Friedman.
7) Bilateral investment treaties impose the most obligations on
a) host states.
b) home states.
c) MNCs.
d) both home and host states about equally.
linked with the competitiveness of its MNCs are
a) historical materialists.
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b) interventionist liberals.
c) orthodox liberals.
d) neomercantilists.
9) The Chapter 11 investment dispute resolution provisions that permit
private investors to obtain relief directly from governments for alleged
NAFTA violations
a) are the first agreements with this type of investor-state arbitration.
b) have been a matter of concern for all 3 NAFTA governments.
c) are now being emulated by the WTO in its dispute settlement
proceedings.
d) are favored by the United States, but opposed by Canada and
Mexico.
10) The OECD was selected as the venue for negotiating a multilateral
agreement on investment (MAI) because
a) most LDCs preferred to have the negotiations in the OECD because
they did not want to participate in investment negotiations.
b) the OECD has had long-term experience with negotiating binding
agreements.
c) the United States wanted the OECD to be the venue for MAI
negotiations.
d) the EU Commission and Canada wanted the OECD to be the venue
for MAI negotiations.
11) Firms engage in horizontal integration to
a) gain more control over inputs into the production process.
b) limit government scrutiny of their activities.
c) defend or increase their market share.
d) ensure the quality of goods that reach the consumer.
12) Charles Kindleberger and Steven Hymer
a) examined MNCs as oligopolistic firms.
b) were Marxist critics of MNCs as neoliberal institutions.
c) examined the obsolescing bargain model for MNCs.
d) examined how MNCs prevented LDCs from achieving genuine,
autonomous development.
13) The obsolescing bargain model is more likely to apply to projects that
require
a) sophisticated technologies.
b) smaller fixed investments.
c) some degree of brand identification.
d) larger fixed investments.
14) The South imposed the strongest restrictions on MNCs
a) in the 1980s to 1990s.
b) in the late 1960s to mid-1970s.
c) in the 1950s to mid-1960s.
d) before World War I.
15) Investor-state dispute settlement provisions were first developed by
a) the EU.
b) NAFTA.
c) BITs.
d) the OECD.
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True-False
1) A growing number of countries are managing sovereign wealth funds
together with their official currency reserves.
2) An enterprise or firm that does business in more than one country is an
MNC.
3) U.S. MNCs tend to favor their home country production and R&D less
than German and Japanese MNCs.
4) The pace of forming new bilateral investment treaties has slowed down.
5) Despite globalization, most MNCs continue to be ethnocentric.
6) When firms undertake FDI in a host country, they usually create new
facilities and productive assets.
7) A rise in trade protectionism usually triggers a decrease in MNC activity.
Fill in the Blank
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1) The ____________________ is a UN-led partnership formed in the late
1990s with 10 principles on human rights, labor standards, the environment,
and anticorruption designed to promote responsible global capitalism.
2) An MNC that extends its operations abroad by producing the same
product or product line in its foreign affiliates is .
permit private investors to obtain relief directly from governments for
alleged NAFTA violations.
4) ____________________ is the net accumulated value of FDI from past
flows.
5) If an MNC geographically separates the different stages of production,
with the output of some affiliates serving as input to other affiliates, the
MNC is __________________.
6)
investment in a host state, this is evidence of the ______________________.
7) involves the purchase of bonds, money market
instruments, or stocks simply to realize a financial return.
Essay
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1) Do liberals, neomercantilists, and historical materialists believe that the
nationality of an MNC makes a difference? Do you think that the
competitiveness of a country is closely tied with the competitiveness of its
MNCs? Explain your answers.
2) How have host country policies (in both the South and North) toward
MNCs changed over time?
3) What are horizontal and vertical integration? Why does a business firm
decide to become horizontally integrated? Why does it decide to become
vertically integrated?
4) Have NGOs had an effect on the behavior of MNCs? What is CSR, and
what are the competing theoretical views regarding the value of this
concept?
5) How do liberals, neomercantilists, and historical materialists differ in
their views of what should be regulated in a foreign investment regime?
Which view do you find most convincing and why?
6) How would you compare the relative importance of BITs, NAFTA, and
the United Nations in regulating foreign investment? Explain your answers
7) How would you compare the relative importance of the United Nations,
the WTO, and the OECD in regulating foreign investment? Explain your
answers.
8) What are some of the major effects of MNCs on host states? Do you
think that the overall effects have been positive or negative, and why?
9) What have been some of the major effects of MNCs on home states? Do
you think that the overall effects have been positive or negative, and why?
10) Why did the developed countries decide to negotiate an MAI in the
OECD, and was this a wise decision? Explain your answers