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| 1 | |
A greenfield investment involves the establishment of new operations in a foreign country. |
| | A) | True |
| | B) | False |
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| 2 | |
FDI flows were steadily increasing from 1975 to 2000, but have been decreasing ever since. |
| | A) | True |
| | B) | False |
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| 3 | |
Since 2002 the number of regulations that have been unfavorable to FDI have increased, particularly in Latin America. |
| | A) | True |
| | B) | False |
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| 4 | |
Research shows that in general, MNEs do not transfer significant technology when they invest in a foreign country. |
| | A) | True |
| | B) | False |
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| 5 | |
The Organization for Economic Cooperation and Development (OECD) is an organization for "wealthy nations" to discuss problems and share solutions, often with a focus on FDI-related issues. |
| | A) | True |
| | B) | False |
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| 6 | |
When a firm undertakes FDI it becomes |
| | A) | an MNE |
| | B) | a transnational corporation |
| | C) | an international company |
| | D) | more diverse |
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| 7 | |
The flow of FDI refers to |
| | A) | the amount of FDI undertaken over a given time period |
| | B) | the total accumulated value of foreign-owned assets at a given time |
| | C) | the flow of FDI out of a country |
| | D) | the flow of FDI into a country |
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| 8 | |
Over the last decade, the largest recipient of FDI is |
| | A) | South Korea |
| | B) | India |
| | C) | China |
| | D) | Mexico |
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| 9 | |
If a company wants a quick entry into a foreign market, ______ is appropriate. |
| | A) | mergers and acquisitions |
| | B) | greenfield investment |
| | C) | portfolio investment |
| | D) | monopoly investment |
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| 10 | |
Which of the following factors is not a driver in the shift toward services in FDI? |
| | A) | The shift follows the general trend away from services and into extractive industries and manufacturing. |
| | B) | Many services cannot be traded internationally. |
| | C) | Countries have been liberalized regulations to facilitate FDI in services. |
| | D) | The internet has allowed some services to relocate value-creation activities. |
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| 11 | |
There are several theories focusing on foreign direct investment. Which of the following is not? |
| | A) | One set of theories seeks to explain why FDI instead of exporting or licensing. |
| | B) | One set of theories seeks to explain why firms in the same industry undertake FDI in the same locations at the same time. |
| | C) | One set of theories seeks to explain the role of the Internet, without which FDI would be impossible. |
| | D) | One seeks to create an eclectic approach, blending elements of other theories. |
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| 12 | |
Which of the following is recognized as a limitation of exporting? |
| | A) | Exporting is effective only when a firm is relatively large. |
| | B) | Exporting is constrained by transportation costs and trade barriers. |
| | C) | Exporting is not permitted to developing countries. |
| | D) | Exporting is subject to universally recognized UN regulations. |
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| 13 | |
When any of the following conditions exist except ______, markets fail as a mechanism for selling know-how and FDI becomes more profitable than licensing. |
| | A) | when the firm has valuable know-how that cannot be adequately protected by a licensing contract |
| | B) | when there are strong patent and copyright enforcement policies in the host and home countries |
| | C) | when the firm needs tight control over a foreign entity to maximize its marketshare and earnings in that country |
| | D) | when a firm's skills and know-how are not amenable to licensing |
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| 14 | |
A(n) _____________ is an industry composed of a limited number of large firms that are interdependent and tend to imitate the behavior of each other. |
| | A) | intertwined industry |
| | B) | common market |
| | C) | oligopoly |
| | D) | growth industry |
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| 15 | |
______ argued that the firms that pioneer a product in their home country often undertake FDI to produce a product for consumption in foreign markets. |
| | A) | Knickerbocker |
| | B) | Vernon |
| | C) | Porter |
| | D) | Smith |
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| 16 | |
Knowledge spillovers such as those arising from the concentration of intellectual talent in Silicon Valley are referred to as |
| | A) | knowledge pools |
| | B) | knowledge bases |
| | C) | knowledge epicenters |
| | D) | externalities |
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| 17 | |
______________ is the political ideology most hostile to FDI, and ______________ is the most supportive of FDI. |
| | A) | The radical view; pragmatic nationalism |
| | B) | Pragmatic nationalism; the free market view |
| | C) | The radical view; the free market view |
| | D) | The free market view; pragmatic nationalism |
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| 18 | |
While the number of countries that adhere to a radical ideology has markedly declined, two countries that have become increasingly hostile to FDI are: |
| | A) | China and North Korea |
| | B) | Vietnam and Cambodia |
| | C) | Venezuela and Bolivia |
| | D) | France and Ireland |
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| 19 | |
Which of the following is not one of the four main benefits of FDI for a host country? |
| | A) | the resource transfer effect |
| | B) | the employment effect |
| | C) | the balance-of-payments effect |
| | D) | the exchange rate effect |
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| 20 | |
If a country is running a current account deficit: |
| | A) | governments are generally pleased for both the short and long term. |
| | B) | occurs when a country is exporting more goods and services than it is importing. |
| | C) | the deficit must be financed by the sales of assets of the country. |
| | D) | is an important consideration, but FDI cannot help a country address the deficit. |
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| 21 | |
Which of the following is not a concern of host country in regard to FDI? |
| | A) | Indigenous companies may not be able to compete effectively against multinational enterprises. |
| | B) | Earnings of the MNE might flow out of the country and have a negative affect on the balance of payments. |
| | C) | There may be a loss of national sovereignty. |
| | D) | Among the community of nations, a lack of FDI means the country will not earn the respect of other countries and increase its vulnerability. |
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| 22 | |
_______________ is a benefit to the home country of FDI, and ________________ is a cost to the home country of FDI. |
| | A) | The MNE's learning from exposure to foreign markets; the substitution for domestic production |
| | B) | The balance of payments improvement from foreign earnings; increased employment opportunity for its citizens |
| | C) | Increased employment through demand for exports; a balance of payment improvement with the initial capital requirements |
| | D) | The resource transfer effect; the current account of the balance of payments affected by transferring production to lower cost foreign locations |
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| 23 | |
All of the following are types of incentives designed to encourage foreign firms to invest in their countries except |
| | A) | tax concessions |
| | B) | low-interest loans |
| | C) | grants |
| | D) | double taxation |
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| 24 | |
Which of the following is most useful from a business perspective? |
| | A) | the product life cycle theory |
| | B) | Knickerbocker's theory of horizontal FDI |
| | C) | the market imperfections approach |
| | D) | Vernon's theory of FDI stages |
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| 25 | |
When a MNE considering FDI is negotiating with a country about a potential investment which of the following is not an important factor? |
| | A) | The value each side places on what the other has to offer. |
| | B) | The strength of the military and police forces of the country |
| | C) | The number of comparable alternative available to each side |
| | D) | Each party's time horizon. |
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