Question 1

According to the eclectic paradigm, firms' FDI activities are driven by the following factors except ____________.

Accepted Answer

A)   ownership advantages
B)   location advantages
C)   internationalization advantages
D)   internalization advantages

Question 2

What role should the government play in attracting foreign investments?

Accepted Answer

For a developing country, the government may play an active role in attracting FDI. As shown in the case, the government may offer incentives like tax breaks and financing support to FDI in certain sectors. Also, the government can work on local infrastructure, such as energy supply and transportation, to improve the overall business environment. In addition, the government may remove or loosen restrictions on foreign investors.
As a result of the potential adverse effects of FDI, the government may use various restrictions to limit FDI in certain areas, such as forbidden entry, limitation on equity ownership, complicated approval process, foreign exchange restriction, extra scrutiny, and performance requirements (e.g., local content, export, technology transfer requirements).

Question 3

What impacts do FDI inflows have on the host country economy?

Accepted Answer

The answer of What impacts do FDI inflows have on...

Question 4

Backward vertical FDI is an investment through which ___________.

Accepted Answer

A)   the investor carries out the same activities abroad as it does at home
B)   the investor expands market presence in its main business
C)   the investor undertakes later-stage activities in the value chain
D)   the investor engages upstream activities in the value chain

Question 5

What are the main benefits that MNCs seek from FDI?

Accepted Answer

The answer of What are the main benefits that MNCs...

Question 6

Honda, an automaker from Japan, has set up plants to manufacture cars in the United States. This is an example of:

Accepted Answer

A)   Outsourcing
B)   Insourcing
C)   Foreign direct investment
D)   Financial investment

Question 7

Which of the following statement is not true regarding the trends of global FDI?

Accepted Answer

A)   Global FDI flows have been continuously growing every year since the 1990s.
B)   There have been several downturns in global FDI due to economic recessions.
C)   FDI inflows to developing countries have been steadily increasing.
D)   Companies from developed countries have contributed the majority of FDI outflows.

Question 8

High transportation costs and tariffs imposed on imports help explain why many firms prefer __________ over __________ for international expansion.

Accepted Answer

A)   foreign direct investment, licensing
B)   exporting, foreign direct investment
C)   foreign direct investment, exporting
D)   exporting, licensing

Question 9

What are the three main arguments of John Dunning's eclectic paradigm on FDI? Use a MNC's FDI to illustrate the three arguments (i.e., why the MNE pursues FDI according to the eclectic paradigm)?

Accepted Answer

The eclectic paradigm provides a holistic approach to explaining FDI and its pattern. The paradigm includes three sets of components:
1. Ownership advantages refer to firm-specific characteristics that enable a firm to gain competitive advantages in international markets.
2. Location advantages refer to location-specific conditions that facilitate a firm's business operations in a country.
3. Internalization advantages refer to benefits gained through owing and controlling foreign operations rather than producing via market transactions. All three types of advantages are important determinants of firms' FDI activities. This paradigm integrates different theories about FDI.
Vodafone invested in Africa to utilize its ownership advantages. Vodafone has developed superior knowledge and economies of scale in wireless services. The company is able to further exploit these advantages in African markets. Africa also offers significant location advantages. In Africa, there is a lack of telecommunication infrastructure but a growing demand for wireless services. The region has witnessed one of the strongest increases in mobile data use in the world. This market presents an attractive opportunity for MNCs like Vodafone to invest. Finally, FDI allows Vodafone to exercise direct control over operations in Africa. Thus, the company can transfer firm-specific advantages to Africa as well as protect and profit from those advantages.

Question 10

A firm primarily seeks to enhance economies of scale and economies of scope through FDI. This reflect the firm's ________ motive.

Accepted Answer

A)   market-seeking
B)   resource-seeking
C)   efficiency-seeking
D)   strategic asset-seeking.

Question 11

How can governments encourage or restrict FDI?

Accepted Answer

The answer of How can governments encourage or restrict FDI?...

Question 12

Which of the following theories suggest that a company like IKEA should set up its own overseas stores rather than licensing its brand and business model to others?

Accepted Answer

A)   Internalization theory
B)   Internationalization theory
C)   International product life cycle theory
D)   The linkage-leverage-learning framework

Question 13

How do monopolistic advantage theory, product life cycle theory, and internalization theory differ from one another?

Accepted Answer

The answer of How do monopolistic advantage theory, product life...

Question 14

What are the advantages and disadvantages of Brazil as an investment destination for GM?

Accepted Answer

The answer of What are the advantages and disadvantages of...

Question 15

Do you agree with CIFUS's decision on Huawei's acquisition of 3Leaf? Why?

Accepted Answer

The answer of Do you agree with CIFUS's decision on...

Question 16

Which of the following is not considered a benefit of inward FDI for the host country?

Accepted Answer

A)   The transfer of capital and resources
B)   The increase of employment
C)   Innovation and productivity improvement driven by increased competition
D)   The repatriation of profits earned overseas

Question 17

According to the OECD benchmark definition, FDI occurs when the direct investor generally owns _________ of the voting power of the enterprise, unless it can be proven that less ownership enables an effective voice in management.

Accepted Answer

A)   10% or more
B)   50% or more
C)   51% or more
D)   100% A

Question 18

In comparison to wholly owned investments, partially owned investments or joint ventures have the following advantages except __________.

Accepted Answer

A)   enabling a high degree of control
B)   access to complementary resources
C)   shared costs and risks
D)   meeting government restriction on equity ownership

Question 19

What do you think of Vietnam as an investment destination?

Accepted Answer

The answer of What do you think of Vietnam as...

Question 20

A U.S.-based computer manufacturer decided to acquire a supplier of computer parts (like motherboards and keyboards)  in China. This is an example of _________.

Accepted Answer

A)   greenfield investment
B)   brownfield investment
C)   vertical FDI
D)   horizontal FDI

Exam 3: Foreign Direct Investment

According to the eclectic paradigm, firms' FDI activities are driven by the following factors except ____________.

Correct Answer
verified

What role should the government play in attracting foreign investments?

What impacts do FDI inflows have on the host country economy?

Correct Answer
verified

Backward vertical FDI is an investment through which ___________.

Correct Answer
verified

What are the main benefits that MNCs seek from FDI?

Correct Answer
verified

Honda, an automaker from Japan, has set up plants to manufacture cars in the United States. This is an example of:

Correct Answer
verified

Which of the following statement is not true regarding the trends of global FDI?

Correct Answer
verified

High transportation costs and tariffs imposed on imports help explain why many firms prefer over for international expansion.

Correct Answer
verified

What are the three main arguments of John Dunning's eclectic paradigm on FDI? Use a MNC's FDI to illustrate the three arguments (i.e., why the MNE pursues FDI according to the eclectic paradigm)?

A firm primarily seeks to enhance economies of scale and economies of scope through FDI. This reflect the firm's ________ motive.

Correct Answer
verified

How can governments encourage or restrict FDI?

Correct Answer
verified

Which of the following theories suggest that a company like IKEA should set up its own overseas stores rather than licensing its brand and business model to others?

Correct Answer
verified

How do monopolistic advantage theory, product life cycle theory, and internalization theory differ from one another?

Correct Answer
verified

What are the advantages and disadvantages of Brazil as an investment destination for GM?

Correct Answer
verified

Do you agree with CIFUS's decision on Huawei's acquisition of 3Leaf? Why?

Correct Answer
verified

Which of the following is not considered a benefit of inward FDI for the host country?

Correct Answer
verified

According to the OECD benchmark definition, FDI occurs when the direct investor generally owns _________ of the voting power of the enterprise, unless it can be proven that less ownership enables an effective voice in management.

Correct Answer
verified
A

In comparison to wholly owned investments, partially owned investments or joint ventures have the following advantages except __________.

Correct Answer
verified

What do you think of Vietnam as an investment destination?

Correct Answer
verified

A U.S.-based computer manufacturer decided to acquire a supplier of computer parts (like motherboards and keyboards) in China. This is an example of _________.

Correct Answer
verified

Exam 3: Foreign Direct Investment

According to the eclectic paradigm, firms' FDI activities are driven by the following factors except ____________.

Correct AnswerverifiedShow Answer

What role should the government play in attracting foreign investments?

What impacts do FDI inflows have on the host country economy?

Correct AnswerverifiedShow Answer

Backward vertical FDI is an investment through which ___________.

Correct AnswerverifiedShow Answer

What are the main benefits that MNCs seek from FDI?

Correct AnswerverifiedShow Answer

Honda, an automaker from Japan, has set up plants to manufacture cars in the United States. This is an example of:

Correct AnswerverifiedShow Answer

Which of the following statement is not true regarding the trends of global FDI?

Correct AnswerverifiedShow Answer

High transportation costs and tariffs imposed on imports help explain why many firms prefer __________ over __________ for international expansion.

Correct AnswerverifiedShow Answer

What are the three main arguments of John Dunning's eclectic paradigm on FDI? Use a MNC's FDI to illustrate the three arguments (i.e., why the MNE pursues FDI according to the eclectic paradigm)?

A firm primarily seeks to enhance economies of scale and economies of scope through FDI. This reflect the firm's ________ motive.

Correct AnswerverifiedShow Answer

How can governments encourage or restrict FDI?

Correct AnswerverifiedShow Answer

Which of the following theories suggest that a company like IKEA should set up its own overseas stores rather than licensing its brand and business model to others?

Correct AnswerverifiedShow Answer

How do monopolistic advantage theory, product life cycle theory, and internalization theory differ from one another?

Correct AnswerverifiedShow Answer

What are the advantages and disadvantages of Brazil as an investment destination for GM?

Correct AnswerverifiedShow Answer

Do you agree with CIFUS's decision on Huawei's acquisition of 3Leaf? Why?

Correct AnswerverifiedShow Answer

Which of the following is not considered a benefit of inward FDI for the host country?

Correct AnswerverifiedShow Answer

According to the OECD benchmark definition, FDI occurs when the direct investor generally owns _________ of the voting power of the enterprise, unless it can be proven that less ownership enables an effective voice in management.

Correct AnswerverifiedA

In comparison to wholly owned investments, partially owned investments or joint ventures have the following advantages except __________.

Correct AnswerverifiedShow Answer

What do you think of Vietnam as an investment destination?

Correct AnswerverifiedShow Answer

A U.S.-based computer manufacturer decided to acquire a supplier of computer parts (like motherboards and keyboards) in China. This is an example of _________.

Correct AnswerverifiedShow Answer

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High transportation costs and tariffs imposed on imports help explain why many firms prefer over for international expansion.

Correct Answer
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