Deck 5: Trading Internationally

Question 1

A joint venture is a company owned by one parent company.

Answer 1

False

Question 2

Horizontal FDI is when a firm moves upstream or downstream in different value chain stages in a host country.

Answer 2

False

Question 3

An FDI in which type of activity would be an example of upstream vertical FDI?

A)A sales and marketing office
B)A replication of the operation in the home country
C)An operation covering all stages of the value chain
D)A manufacturing facility for components of the firm's main product

Answer 3

D

Question 4

Which statement holds true about state-owned enterprises?

A)The majority of big multinational enterprises from EU countries are in state ownership
B)Sovereign wealth funds are the only important form of state-owned enterprises that invest abroad directly
C)State-owned enterprises from non-EU countries are not allowed to invest in the EU
D)State-owned enterprises play an important role in FDI from emerging economies

Question 5

Assets specificity refers to investments that are:

A)Specific to a business relationship
B)Specific to a business function
C)Specific to a country
D)Specific to a product division

Question 6

Reduced contract monitoring and enforcement costs are an example of an internalization advantage.

Question 7

The expectation of knowledge spillovers is a major motivation for governments to attract foreign investors to their country.

Question 8

Foreign portfolio investment (FPI)is a special case of foreign direct investment (FDI).

Question 9

Multinational companies concerned about dissemination risk prefer to establish a licencing contract instead of a wholly owned subsidiary.

Question 10

The shift in the relative bargaining power between MNEs and host governments after the foreign investor incurred the sunk costs of their initial investment is known as:

A)Obsolescing bargain
B)Resurgent bargain
C)Empowered negotiation
D)Resurgent negotiation

Question 11

Location-bound resources are resources that cannot be transferred from one country to another.

Question 12

A multinational enterprise is defined as an enterprise that:

A)Has sales in more than one country
B)Has employees from more than one country
C)Has subsidiaries in more than one country
D)Is buying components in more than one country

Question 13

What is the relationship between the stock and flow of FDI?

A)FDI flows are generated from FDI stock
B)Changes in FDI stock correspond to changes in FDI flows
C)FDI stock adds to FDI flows
D)FDI flows add to the FDI stock

Question 14

Which of the following is not an element of the OLI paradigm?

A)Locational advantages
B)Ownership advantages
C)Internalization advantages
D)All of the above answers are elements of the OLI paradigm.