Exam 7: Foreign Direct Investment

European Union nations,the United States,and Japan account for the vast majority of world foreign direct investment inflows.

A system of production in which each of a product's components is produced in the location where the cost of producing the component is lowest is called ________.

Which of the following is LEAST likely to be used by home-country governments to promote outbound foreign direct investment?

A company that integrates backward or forward can achieve market power through ________.

Exports and imports of tourism and business consulting are included in which of the following?

When a country provides tax breaks and low-interest loans to companies,it is using which of these to encourage inflows of foreign direct investment?

The extension of company activities into stages of production that provide a firm's inputs or absorb its output is called ________.

Identify why a home country might support or discourage outgoing foreign direct investment.

Explain the methods of restricting and promoting foreign direct investment that home and host countries can use.

In industries with a limited number of large firms,foreign direct investment decisions frequently resemble a "follow the leader" scenario.

Scenario: Global Manufacturing,Inc.(GMI) GMI is a fast-growing Canadian company that wants a production system that makes each of its product's two components in the location where the cost of production is lowest.The components will then be taken to maquiladoras for final assembly.GMI purchased an existing company in Brazil to produce component A and built a subsidiary in Thailand to produce component B. -GMI's production system can best be described as ________.

Today,all factors of production are internationally mobile.

The ________ theory states that when an aspect of the market makes a transaction less efficient than it could be,a company will undertake foreign direct investment to internalize the transaction and thereby remove the efficiency reducing aspect.

Explain the view of the "eclectic theory" of FDI regarding when FDI will be undertaken.How might a host country offer incentives to attract FDI?

The ________ is a national account that records transactions involving the purchase or sale of assets.

The destination of most foreign direct investment inflows is ________ countries.

The practice of "following clients" can be expected in industries where many component parts are obtained from suppliers with whom a manufacturer has a close working relationship.

Explain how the decision whether or not to "follow clients" can lead to FDI.Discuss why a host country might promote or restrict foreign direct investment.

The eclectic theory states that firms undertake foreign direct investment when the features of a particular location combine with ownership and internalization advantages to make a location appealing for investment.

Foreign direct investment is the purchase of physical assets or a significant amount of the ownership (stock)of a company in another country to gain a measure of management control.