Exam 8: Foreign Direct Investment

As transportation costs or trade barriers increase, exporting becomes unprofitable, and the choice is between FDI and _____.

_____ occurs when a domestic firm legally allows a foreign firm the right to produce its product, to use its production processes, or to use its brand name or trademark.

A country rejects FDI proposals in certain industries. It does so because the tangible advantages of such investments are lesser than potential costs like loss of employment and reduction of overall well-being. However, it aggressively pursues inviting foreign investments in sectors like infrastructure, education, and healthcare because of the benefits that accrue with them. Which political view of FDI is discussed in this example?

What is an oligopoly? Discuss the impact of interdependence in an oligopoly.

_____ is essentially the service-industry version of licensing, although it normally involves much longer term commitments.

Research supports the view that multinational firms often transfer significant technology when they invest in a foreign country.

Which of the following is the prime reason why Africa has attracted FDI in recent years?

_____ arise(s) from using resource endowments or assets that are tied to a particular foreign location and that a firm finds valuable to combine with its own unique assets.

What are the major drawbacks of licensing according to the internalization theory?

_____ arises when two or more enterprises encounter each other in different regional markets, national markets, or industries.

Which of the following summarizes the total amount of resources invested in factories, stores, office buildings, and the like?

By placing tariffs on imported goods, governments can increase the cost of exporting relative to foreign direct investment and licensing.

Why do many economists favor internalization theory as an explanation for FDI compared to Knickerbocker's theory?

In general, FDI in the form of greenfield investments should increase competition.

Discuss an example that substantiates Dunning's argument about location-specific advantages.

In practice only a few countries country have adopted the free market view in its pure form.

Licensing is usually a good option for firms in high-tech industries where protecting firm-specific expertise is of paramount importance.

_____ seeks to explain why firms often prefer foreign direct investment over licensing as a strategy for entering foreign markets.

The pragmatic nationalist view highlights _____ of FDI.

Which of the following is a major drawback of using Knickerbocker's theory in explaining FDI?