Exam 3: Foreign Direct Investment Theory and Application

The evolutionary perspective of FDI claims that international investment is an ongoing evolutionary process shaped by an MNE's international experience, organizational capabilities, strategic objectives, and environmental dynamics.

_______ occurs when the MNE enters a foreign country to produce intermediate goods that are intended for use as inputs in its home country (or in other subsidiaries) production process to market its homemade products overseas, or to produce final outputs in a host country using its home-supplied intermediate goods or materials.

_______________ is investment by individuals, firms, or public organs (e.g., governments or non-profit organizations) in foreign financial instruments such as government bonds, corporate bonds, mutual funds, and foreign stocks.

IBM's breakthrough development in voice recognition system did not generate much income until this system was deployed and adapted to such markets as Singapore, Hong Kong, Taiwan, China, and Korea through its subsidiaries there. This is an example of ____.

Identify the term "It is defined as the benefits arising from a host country's comparative advantages accrued for foreign direct investors."

An example of ____ that Compaq undertook FDI in the Middle East, Latin America, and Europe because the competition in the computer industry overseas is less intense than that in the US.

FDI's benefits host countries with increased employment opportunities.

IBM generates significant income from its voice recognition software used by many Chinese. This software, first developed in the U.S., actually did not generate sizable income until a Chinese version was developed by the company's subsidiary in Beijing. This is an example of _____.

If FDI abroad is to manufacture products not manufactured by the parent company at home, it is called

Fundamental to this theory is the idea that a sure rate of return (say, 9% per year consistent over the next five years) is preferable to a rate of return being higher on average but fluctuating through time (say average 9.5% per year but with immense fluctuations during this five year period)

FDI inflows are generally correlated with economic growth. This is why countries fight to attract FDI.

Liability of foreignness deals with the ethical issues of doing business abroad that result in a competitive disadvantage vis-à-vis indigenous firms.

The activity in which an MNE internalizes its globally dispersed foreign operations through a unified governance structure and common ownership.

Dynamic capabilities refer to a firm's ability to diffuse, deploy, utilize, and rebuild firm-specific resources in order to attain a sustained competitive advantage.

Internalization advantages includes avoiding costs of moral hazard.

Which type of FDI occurs when the MNE enters a foreign country to produce the same product(s) produced at home (or offer the same service as it does at home)?

Offshore extractive investments in petroleum and mineral is the example of

Market-seeking FDI attempts to secure market share and sales growth in the target foreign market. Apart from market size and the prospects for market growth, the reasons for market-seeking FDI include situations in which

Honda has created a subsidiary in the United States for auto parts. This is an example of

Which advantages are benefits derived from the proprietary knowledge, resources, or assets possessed only by the owner (MNE)?