117. To encourage inward FDI, it is increasingly common for governments to:
118. Host governments use a range of controls to restrict inward FDI. The two most common
are:
119. Many services have to be produced where they are sold; hence _____ is not an option.
120.
(p. 268)
Firms for which licensing is not a good option include:
121.
(p. 269)
Although it normally involves much longer-term commitments, franchising is essentially
the service industry version of:
122. What is meant by the term foreign direct investment? Describe the difference between
the flow of foreign direct investment and the stock of foreign direct investment.
123. “Firms prefer to acquire existing assets rather than undertake greenfield investments
while contemplating FDI.” Explain the reasons that support this argument.
124. Despite its advantages, FDI has been described as an “expensive” and “risky”
international growth strategy. Other things being equal, why is FDI expensive and risky when
compared to licensing and exporting?
125. When a firm exports, it need not bear the costs associated with FDI, and it can reduce
the risks associated with selling abroad by using a native sales agent. Exporting, however, is not
without its limitations. Discuss the most common limitations of exporting as compared to FDI.
126. In the context of the internalization theory, explain why licensing may not be an attractive
option.
127. Under what circumstances, will a firm favor foreign direct investment over exporting as
an entry strategy?
128. Describe Dunning’s arguments regarding the location-specific advantages.
129. In the context of FDI, describe the political ideologies of the radical view, the free market
view, and pragmatic nationalism.
130. Briefly describe the changes taking place in the attitudes toward FDI in countries across
the globe.
Recent years have seen a marked decline in the number of countries that adhere to a radical
ideology. Although few countries have adopted a pure free market policy stance an increasing
number of countries are gravitating toward the free market end of the spectrum and have
liberalized their foreign investment regime. This includes many countries that less than two
decades ago were firmly in the radical camp (e.g. the former communist countries of Eastern
131. Briefly describe the benefits of inward FDI for a host country that arise from employment
effects and balance–of-payments effects.
132. What are the benefits of FDI to the home (source) country?
133. How can governments restrict the outward flow of FDI?
134. Describe the role of WTO in the liberalization of FDI.
135. What are the different types of industries for which licensing is not a good option?
136. What is franchising? With the help of a suitable example, explain how franchising can be
a profitable alternative to FDI.