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1. The liability of foreignness is the inherent disadvantage foreign firms experience in host countries because of their
nonnative status.
a. True
b. False
2. Customer discrimination against foreign firms has been eliminated in recent years.
a. True
b. False
3. The small size of a firm is a main reason firms go abroad.
a. True
b. False
4. The large size of the domestic market is the main reason firms go abroad.
a. True
b. False
5. Small firms often go abroad to follow their large counterparts as suppliers.
a. True
6. Small firms in a large domestic market are less likely to internationalize because of their relatively poor resource base
and large size of their domestic market.
a. True
b. False
7. In regards to industry-based considerations, the higher the entry barriers, the more intensely firms will attempt to
compete abroad.
a. True
b. False
8. Backward vertical integration refers to vertical integration that has not been updated.
a. True
b. False
9. The bargaining power of suppliers may prompt backward vertical integration.
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a. True
b. False
10. The bargaining power of buyers may lead to forward vertical integration.
a. True
b. False
11. The market potential of substitute products may encourage firms to bring them abroad.
a. True
12. Currency risks can be reduced by currency hedging or strategic and hedging.
a. True
13. One of the best ways for a foreign market entrant to overcome the liability of foreignness is through its superb value of
firm-specific assets.
a. True
b. False
14. The more a company leverages its patented, branded, and trademarked products abroad, the less likely it is that
counterfeits of these products will pop up.
a. True
b. False
15. Firms that face high dissemination risks are more likely to choose against entering a foreign market.
a. True
b. False
16. In an obsolescing bargain, an MNE receives greater incentives from a foreign government after entering that market.
a. True
b. False
17. A host country’s local content requirements are primarily an attempt to avoid the presence of screwdriver plants.
a. True
b. False
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18. Under the Stage Model school of thought firms will enter culturally similar countries during their first stage of
internationalization.
a. True
b. False
19. Industries in which suppliers and buyers locate in a specific region are more likely to benefit from location-specific
advantages.
a. True
20. Firms with a market-seeking strategy will locate primarily where the advantages include an abundance of innovative
individuals, firms, and universities.
a. True
21. One of the main first-mover advantages a firm tries to gain is the resolution of technological and market uncertainties.
a. True
b. False
22. First-mover advantages always outweigh late-mover advantages.
a. True
23. One of the drawbacks of large-scale entries is limited strategic flexibility.
a. True
24. MNEs that enter foreign markets through foreign direct investment do not have OLI advantages.
a. True
b. False
25. Direct exports may work best if the export volume is small.
a. True
b. False
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26. Indirect exporting firms avoid exporting through domestically based intermediaries.
a. True
27. Turnkey projects reduce the competitiveness of foreign clients and increase their dependence when selling state of the
art technology.
a. True
b. False
28. Acquisition adds no new capacity.
a. True
b. False
29. Entry strategies may change over time.
a. True
b. False
30. Non-equity modes of entry include joint ventures and wholly owned subsidiaries.
a. True
b. False
31. Non-equity modes of entry include direct exports and licensing.
a. True
b. False
32. One of the disadvantages of franchising is the risk of creating competitors.
a. True
33. Equity and non-equity modes of entry into foreign markets are essentially the same.
a. True
34. A firm that merely exports/imports with no FDI is usually not regarded as an MNE.
a. True
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b. False
35. Country-of-origin affect consistently confers a positive perception of foreign firms and products.
a. True
b. False
36. An emerging MNE’s ability to identify and bridge gaps is known as location advantage.
a. True
b. False
37. Some foreignness is never an asset.
a. True
38. MNEs are firms that are truly global.
a. True
39. Formal rather than informal “rules of the game” govern competition in foreign markets.
a. True
b. False
40. In order to be successful in foreign markets, it is necessary for a firm to match its efforts in market entry and
geographic diversification with its strategic goals.
a. True
b. False
41. The differences in formal and informal institutions that govern the rules of the game in different countries include
_______ differences.
a. Regulatory
b. Language
c. Cultural
d. All of the above
42. As firms expand into more countries, they should recognize that:
a. Foreign firms are less likely to be discriminated against.
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b. Foreign firms primarily deploy overwhelming resources and capabilities that offset the liability of foreignness.
c. Foreign firms seldom are able to offset the liability of foreignness and still have some competitive advantage.
d. Discrimination against foreign firms happens in informal ways and rarely in formal ways.
43. The liability of foreignness is:
a. The inherent disadvantage foreign firms experience in host countries.
b. Related strictly to the formal institutions that govern the way business is done in a foreign country.
c. A challenge when it comes to resource supply but not to competitive advantage.
44. When it comes to the propensity to internationalize, an enthusiastic internationalizer will most likely be characterized
by being a:
a. Large firm in a large domestic market.
b. Large firm in a small domestic market.
c. Small firm in a large domestic market.
d. Small firm in a small domestic market.
45. Which of the following would be considered an obstacle to internationalization for a small firm in a large domestic
market?
a. A plentiful resource base.
b. The large size of their domestic market.
c. A large margin for error.
d. All of the above.
46. Small firms in a large domestic market are referred to as:
a. Enthusiastic internationalizers.
b. Follower internationalizers.
c. Slow internationalizers.
47. The superb value of firm-specific resources and capabilities results in foreign entrants being:
a. Faced with serious dissemination risk.
b. Less able to leverage such assets overseas.
c. Better able to overcome the liability of foreignness.
48. Firms may choose not to enter certain countries if:
a. They possess rare firm-specific assets.
b. The transaction costs are be too low.
c. There are dissemination risks.
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d. There is an authorized diffusion of firm-specific assets.
49. Organizing firm-specific resources and capabilities as a bundle:
a. Favors firms with strong complementary assets.
b. Prevents having assets integrated as a system.
c. Discourages use of them overseas.
50. Which of the following is not a regulatory risk?
a. An obsolescing bargain.
b. Deals that have been struck by MNEs and host governments.
c. Nationalization.
d. Recent trends among host governments regarding their relationships with MNEs.
51. Which of the following exemplify trade barriers?
a. Tariffs.
b. Local content requirements.
c. Restrictions on certain entry modes.
d. All of the above
52. In industries that face high barriers to entry, firms are more likely to:
a. Be more intense in their attempts to compete abroad.
b. Avoid competing in foreign markets.
c. Ignore economies of scale.
d. All of the above.
53. Among the resource-based consideration a firm faces when deciding whether to enter foreign markets is:
a. High entry barriers.
b. The bargaining power of suppliers.
c. The level of dissemination risks.
d. Currency risks.
54. A global trend since the 1980s and 1990s has been toward:
a. Nationalization of foreign MNE assets.
b. Privatization of assets.
c. Expropriation of assets.
d. None of the above.
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55. Which of the following is NOT considered a trade barrier?
a. Tariffs.
b. Tariffs.
c. Local content requirements.
d. Entry mode restrictions.
56. A firm that spreads out its activities in a number of countries in different currency zones in order to offset the currency
losses in certain regions through gains in other regions is engaged in:
a. Tariffs.
b. Local content requirements.
c. Strategic hedging.
d. Sunk costs.
57. Which of the following mottos is applicable when considering the where-to-enter question of foreign market entry?
a. Wait for the dust to settle.
b. Money makes the world go round.
c. Actions speak louder than words.
58. A location-specific advantage that a firm with efficiency-seeking strategy would be:
a. A location-specific advantage that a firm with efficiency-seeking strategy would be:
b. Strong market demand.
c. Economies of scale.
59. Which of the following is not a location-specific advantage?
a. Agglomeration.
b. Knowledge spillovers.
c. An unskilled labor force.
d. A pool of specialized suppliers and buyers.
60. The strategic goal of __________ involves going after countries that offer the highest price.
a. Natural resources-seeking
b. Market-seeking
c. Efficiency-seeking
d. Innovation-seeking
61. Institutional distance involves all of the following EXCEPT that which is:
a. Regulatory.
b. Normative.
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c. Cognitive.
d. Integrative.
62. First-mover advantages do not include:
a. Developing proprietary, technological leadership.
b. Preempting scarce assets.
c. Establishing entry barriers.
d. Successful clashes with dominant firms in domestic markets.
63. Late-mover advantages do not include:
a. Taking a free ride on first movers’ investments.
b. Joining the game with massive firepower when some of the uncertainties are removed.
c. Preempting scarce assets.
d. Taking advantage of first movers’ inflexibility by leapfrogging over them.
64. The first-mover advantage of a company such as Amazon is:
a. Developing proprietary, technological leadership.
b. Opportunity for a free ride.
c. Resolution of market uncertainties.
d. Lowering the barriers to market entry.
65. First-mover preemptive investments would include:
a. Avoiding scarce resources.
b. Finding free-ride opportunities.
c. Waiting for market uncertainties to be resolved.
66. Which of the following would NOT be considered a drawback of small-scale entry into a foreign market?
a. Lack of strong commitment.
b. Learning by doing.
c. Difficulties in building market share.
67. A key dimension in foreign entry decisions is the amount of resources committed to entering the foreign market,
referred to as:
a. Scale of entry.
b. Regulatory risk.
c. Regulatory risk.
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68. Which of the following would NOT be considered an advantage of MNEs?
a. Ownership.
b. Internalization.
c. Barriers.
d. Location.
69. The ________ strategy treats foreign demand as an extension of domestic demand.
a. Turnkey operations.
b. Direct exporting.
c. Greenfield operations.
d. Joint venture.
70. One of the factors that explains why exporters choose intermediaries primarily is:
a. The development of proprietary, technological leadership.
b. Information asymmetries concerning foreign markets.
c. Intermediaries share the same objectives as exporters.
d. Indirect exports provide more information about product performance overseas.
71. Large-scale entries do which of the following?
a. Benefit from a strategic commitment.
b. Assure local customers and suppliers.
c. Deter potential entrants.
d. None of the above.
72. Small-scale entries normally benefit by their:
a. Unlimited upside risk.
b. Emphasis on “learning by doing.”
c. Strong strategic commitment.
d. First mover advantages.
73. Non-equity modes of entry typically involve:
a. Exports and contractual agreements.
b. Larger, harder-to-reverse commitments.
c. Establishing independent organizations overseas.
74. All of the follow are true of direct exports EXCEPT:
a. Most basic mode of entry.
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b. Capitalizes on economies of scale in production concentrated in the home country.
c. Affords better control over distribution.
75. Selling the rights to intellectual property for a royalty fee happens with:
a. Licensing/franchising.
b. Turnkey projects.
c. R&D contracts.
76. Which is NOT true of joint ventures?
a. They are jointly owned by two or more parent companies.
b. They share risks with local partners.
c. They gain access to the local partner’s knowledge about the host country.
77. Greenfield operations refer to:
a. Wholly owned subsidiaries.
b. Turnkey projects.
c. R&D contracts.
78. The liability of foreignness sometimes has a positive effect on customers’ perception and their desire for products
from a certain country. This concept is known as:
a. Strategic hedging.
b. Country-of-origin effect.
c. OLI advantage.
d. Co-marketing.
79. Emerging MNEs do not always fit into the traditional framework of successful multinationals, but are falling under a
new theory called the LLL advantage. Which of the following is NOT part of that theory?
a. Location.
b. Leverage.
c. Linking.
80. According to the textbook, what is most necessary to overcome the liability of foreignness?
a. Grasping the dynamism underlying the industry.
b. Developing overwhelming resources and capabilities.
c. Understanding the rules of the game.
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d. Matching market entry efforts with strategic goals.
e. Creating good relationships with key stakeholders.
82. Describe how the size of a firm and the size of the domestic market interact in influencing whether a firm seeks
markets abroad.
83. A firm faces resources-based, industry-based, and institution-based considerations when entering foreign markets.
Describe the formal institution-based constraints of such a firm.
84. “Location, location, location” is an important factor in many strategic decisions. What considerations are essential in
assessing location of potential foreign market entry?
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85. Is it better to be a first mover or a late mover when entering foreign markets? Describe the advantages of either a first
mover or late mover based on the example of an actual company.
ANSWER:
86. What are the OLI advantages and how do they relate to MNEs?
87. According to a report by Rugman and others, among the largest Fortune Global 500 MNEs, feware truly “global.”
What does this statement mean and what does it take to be global?
88. Emerging multinationals are finding ways to succeed that do not necessarily conform to the notion of OLI advantages.
Describe how the LLL framework does a better job of capturing the basis of their success.
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89. The text points out that from a resource-based view, you and your firm need to develop overwhelming
capabilities to offset the liability of foreignness. However, how does a small firm do that?
90. Discussion of strategies for MNEs focuses on growth and global expansion. Under what circumstances can
downsizing and withdrawing from countries make sense? Why might some firms fail to withdraw or downsize?