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c8 Key
1. When a firm exports its products to a foreign country, foreign direct investment occurs.
2. Greenfield investment involves the establishment of a new operation in a foreign country.
3. The flow of foreign direct investment refers to the number of countries a firm is investing in at any given
point in time.
4. The stock of foreign direct investment refers to the total accumulated value of foreign-owned assets at a
given time.
5. The globalization of the world economy is having a negative effect on the volume of FDI.
6. FDI has grown significantly slower than world trade and world output.
7. According to the United Nations, the majority of changes made worldwide between 1992 and 2009 in the
laws governing foreign direct investment have created a more favorable environment for FDI.
8. Historically, most FDI has been directed at the least developed nations of the world.
9. Since World War II, the United States has been the largest source country for FDI.
10. When a firm allows another enterprise to produce its products under license, the licensee bears the costs or
risks.
11. The attractiveness of exporting increases in comparison to FDI or licensing when products have a low
value-to-weight ratio.
12. By placing tariffs on imported goods, governments can increase the cost of exporting relative to foreign
direct investment and licensing.
13. By limiting imports through quotas, governments reduce the attractiveness of FDI and licensing.
14. A critical competitive feature of an oligopoly is independence of the major players.
15. Multipoint competition arises when two or more enterprises encounter each other in different regional
markets, national markets, or industries.
16. Economists refer to knowledge "spillovers" as externalities, and there is a well-established theory
suggesting that firms can benefit from such externalities by locating close to their source.
17. According to the extreme version of radical view, no country should ever permit foreign corporations to
undertake FDI, because they can never be instruments of economic development, only of economic
domination.
18. By the early 1990s, the radical position toward FDI was in retreat due to the rise of communism in eastern
Europe.
19. According to the free market view, countries should specialize in the production of those goods and services
that they can produce most efficiently.
20. According to the pragmatic nationalist view, no country should ever permit foreign corporations to
undertake FDI.
21. The indirect employment effects of FDI are often as large as, if not larger than, the direct effects.
22. Services such as telecommunications, retailing, and many financial services, where the service has to be
produced where it is delivered, lend themselves well to exporting.
23. An acquisition does not result in a net increase in the number of players in a market.
24. Offshore production refers to FDI undertaken to serve the host market.
25. Many investor nations now have government-backed insurance programs to cover major types of foreign
investment risk like the risks of expropriation (nationalization), war losses, and the inability to transfer profits
back home.
26. Ownership restraints and performance requirements are the two most common ways in which host
governments restrict FDI.
27. Performance requirements are controls over the behavior of the MNE's local subsidiary.
28. The WTO embraces the promotion of international trade in services.
29. The location-specific advantages argument associated with John Dunning helps explain why firms prefer
FDI to licensing or to exporting.
30. Licensing is not a good option if the competitive advantage of a firm is based upon managerial or marketing
knowledge that is embedded in the routines of the firm or the skills of its managers, and that is difficult to
codify in a "book of blueprints."
31. Franchising is essentially the service-industry version of licensing, although it normally involves much
longer-term commitments than licensing.
32. Despite the move toward a free market stance in recent years, many countries still have a rather pragmatic
stance toward FDI.
33. A firm's bargaining power is low when the host government places a low value on what the firm has to
offer.
34. A computer manufacturing firm from the United States invests in a microprocessor manufacturing plant in
Taiwan. This is an example of:
35. According to the U.S. Department of Commerce, which of the following, occurs whenever a U.S. citizen,
organization, or affiliated group takes an interest of 10 percent or more in a foreign business entity?
36. Once it undertakes FDI, a firm becomes a(n):
37. Which of the following is most likely to involve establishment of a new operation in a foreign country?
38. Which of the following indicates that a firm has a full outright stake in an acquisition?
39. Which of the following refers to the amount of FDI undertaken over a given period (normally a year)?
40. The stock of foreign direct investment refers to:
41. Which of the following statements is true regarding foreign direct investment?
42. Why has FDI grown more rapidly than world trade?
43. The United States has been an attractive target for FDI partly because of its:
44. Which of the following is true regarding the inflow of FDI?
45. Countries such as the United States, the United Kingdom, France, Germany, the Netherlands, and Japan
dominate in the share of total global stock of FDI and FDI outflows and in rankings of the world's largest
multinationals because they:
46. Mergers and acquisitions differ from greenfield investments in that:
47. Which of the following involves producing goods at home and then shipping them to the receiving country
for sale?
48. Which of the following states that combining location-specific assets or resource endowments and the firm's
own unique assets often requires FDI, and it also requires the firm to establish production facilities where those
foreign assets or resource endowments are located?
49. 3M, an American firm, manufactures adhesive tapes in St. Paul, Minnesota, and ships the tapes to South
Korea for sale. According to this information, which of the following is being done by 3M?
50. Which of the following involves granting a foreign entity the right to produce and sell the firm's product in
return for a royalty fee on every unit sold?
