Licensing would be a good option for firms in which of the following industries? Show
A. High-technology industries in which protecting firm-specific expertise is of paramount importance. B. Global oligopolies, in which competitive interdependence requires that multinational firms maintain tight control over foreign operations. C. Industries in which intense cost pressures require that multinational firms maintain tight control over foreign operations. D. In fragmented, low-technology industries in which globally dispersed manufacturing is not an option. According to internalization theory: A. licensing gives a firm the tight control over manufacturing, marketing, and strategy in a foreign country that may be required to maximize its profitability. B. licensing may result in a firm's giving away valuable technological know-how to a potential foreign competitor. C. licensing has no major drawbacks as a strategy for exploiting foreign market opportunities. D. a problem with licensing arises when the firm's competitive advantage is based much on its products rather than on the management, marketing, and manufacturing capabilities that produce those products. E. licensing is more profitable than FDI. According to internalization theory: A. licensing gives a firm the tight control over manufacturing, marketing, and strategy in a foreign country that may be required to maximize its profitability. B. licensing may result in a firm's giving away valuable technological know-how to a potential foreign competitor. C. licensing has no major drawbacks as a strategy for exploiting foreign market opportunities. D. a problem with licensing arises when the firm's competitive advantage is based much on its products rather than on the management, marketing, and manufacturing capabilities that produce those products. E. licensing is more profitable than FDI. Recommended textbook solutions
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Terms in this set (43)FDI occurs when a firm: A. ships its products from one country to another. B. invests directly in facilities to produce a product in a foreign country. C. invests in the shares of another company operating in the same country. D. grants permission to another company in a different country to use its brand name. B. invests directly in facilities to produce a product in a foreign country. Which of the following is an example of a greenfield investment? A. A Chinese sugar maker setting up a sugar crushing facility in Cuba. B. A Serbian automobile company purchasing a Croatian component manufacturer. C. A Finnish mobile phone manufacturer expanding its production facility in Finland. D. An Indian oil exploration company acquiring an oil refining company. A. A Chinese sugar maker setting up a sugar crushing facility in Cuba. Which of the following statements is true about the growth of foreign direct investment in the world economy over the last few decades? A. FDI has experienced a slower growth than world output. B. FDI has accelerated faster than world trade growth. C. FDI has remained the same over the past few decades. D. FDI has dropped dramatically. B. FDI has accelerated faster than world trade growth. Which of the following factors has had a positive effect on the volume of foreign trade investments? A. Emerging social democracies B. Fluctuating current rates C. Aging demographics D. World economy globalization D. World economy globalization Which of the following factors has made the United States an attractive target for foreign direct investment? A. Its unstable economy B. Its unfavorable political environment C. Its wealthy domestic markets D. Its closed society C. Its wealthy domestic markets The stock of FDI is: A. the amount of FDI undertaken over a given period of time. B. the total accumulated value of foreign-owned assets at a given time. C. the flow of FDI out of a country. D. the amount of foreign direct investment made by domestic companies over a given period of time. B. the total accumulated value of foreign-owned assets at a given time. The _____ of FDI refers to the amount of FDI undertaken over a year. A. stock B. net value C. accumulated value D. flow D. flow Which of the following is the prime reason why Africa has attracted FDI in recent years? A. Growth of the services sector B. Complete deregulation of markets C. Wave of privatization D. Raw material availability D. Raw material availability Which of the following summarizes the total amount of resources invested in factories, stores, office buildings, and the like? A. Gross capital index B. Gross fixed capital formation C. Gross domestic product D. Gross national product B. Gross fixed capital formation Which of the following primarily explains why developing nations are characterized by lower percentage of cross-border mergers and acquisitions compared to developed nations? A. Fewer target firms to acquire in developing nations B. Fierce opposition to mergers and acquisitions in developed nations C. Unwillingness of foreign companies to invest in developing nations D. Presence of import quotas in developing nations A. Fewer target firms to acquire in developing nations When contemplating FDI, why do firms apparently prefer to acquire existing assets rather than undertake greenfield investments? A. Greenfield investments are characterized by reduced management control. B. Mergers and acquisitions are preferred because most greenfield investments fail. C. It is easier and less risky for a firm to build strategic assets than acquire similar assets. D. Mergers and acquisitions are quicker to execute than greenfield investments. D. Mergers and acquisitions are quicker to execute than greenfield investments. A French wind power company gives an Indonesian company the right to produce and sell wind turbines in return for a royalty fee on every unit sold. Which business practice is this an example of? A. Acquisition B. Licensing C. Exporting D. Greenfield investment B. Licensing Which of the following specifically reduces the viability of an exporting strategy specifically for products with low value-to-weight ratios? A. Foreign exchange controls B. Trade barriers C. Transportation costs D. Output quality C. Transportation costs Which of the following is a way in which governments increase the attractiveness of FDI and licensing relative to exporting? A. By implementing import quotas B. By imposing FDI limits in industries C. By increasing tax rates D. By limiting free flow of capital A. By implementing import quotas Identify the theory that seeks to explain why firms often prefer foreign direct investment over licensing as a strategy for entering foreign markets. A. Internalization theory B. Product life-cycle theory C. Perfect markets theory D. Random walk theory A. Internalization theory In which of the following situations does the internalization theory recommend FDI as opposed to licensing? A. When the firm has know-how that can be adequately protected by a licensing contract B. When the firm produces products that have a low value-to-weight ratio C. When a firm's skills and know-how are amenable to licensing D. When the firm needs tight control over a foreign entity D. When the firm needs tight control over a foreign entity Which of the following best describes an industry composed of a limited number of large firms? A. An oligopoly B. A monopoly C. An oligarchy D. A perfectly competitive market A. An oligopoly Which of the following is a direct consequence of the interdependence between firms in an oligopoly? A. Increased regulation B. Increased consumer welfare C. Imitative behavior D. Longer product life-cycles C. Imitative behavior Which of the following observations concerning Knickerbocker's theory is true? A. It does not explain imitative FDI behavior by firms in oligopolistic industries. B. Economists favor this theory as an explanation for FDI compared to the internalization theory. C. It addresses the issue of whether FDI is more efficient than exporting or licensing for expanding abroad. D. It does not explain why the first firm in an oligopoly decides to undertake FDI rather than to export or license. D. It does not explain why the first firm in an oligopoly decides to undertake FDI rather than to export or license. _____ arises when two or more enterprises encounter each other in different regional markets, national markets, or industries. A. Horizontal integration B. Multipoint competition C. An oligopoly D. Vertical integration B. Multipoint competition According to Knickerbocker's theory: A. when a firm has valuable know-how that cannot be adequately protected by a licensing contract it engages in FDI. B. when a firm's skills and know-how are not amenable to licensing, it usually prefers the FDI route. C. by placing tariffs on imported goods, governments indirectly increase the cost of exporting relative to foreign direct investment and licensing. D. when a firm that is part of an oligopolistic industry expands into a foreign market, other firms in the industry will be compelled to make similar investments. D. when a firm that is part of an oligopolistic industry expands into a foreign market, other firms in the industry will be compelled to make similar investments. What is the term that describes when two or more enterprises encounter each other in different regional markets, national markets, or industries? A. Multipoint competition B. Monopoly C. Location-specific competition D. Oligopoly A. Multipoint competition Which of the following is a major drawback of using Knickerbocker's theory in explaining FDI? A. It ignores the fact that firms invest in a foreign country when demand in that country will support local production. B. It does not explain why the first firm in an oligopoly decides to undertake FDI rather than to export or license. C. It fails to identify when it is profitable to invest abroad. D. It ignores the fact that licensing as an entry strategy has its limitations. B. It does not explain why the first firm in an oligopoly decides to undertake FDI rather than to export or license. The _____ suggests that a firm will establish production facilities where foreign assets or resource endowments that are important to the firm are located. A. product life-cycle theory B. internalization theory C. multipoint competition theory D. eclectic paradigm D. eclectic paradigm Advantages that arise from using resource endowments or assets that are tied to a particular place and that a firm finds valuable to combine with its own unique assets are known as: A. location-specific advantages. B. capital-specific advantages. C. absolute advantages. D. production factor advantages. A. location-specific advantages. According to the _____ view of FDI, MNEs extract profits from the host country and take them to their home country, giving nothing of value to the host country in exchange. A. imperialist B. conservative C. free market D. radical D. radical Which view of FDI traces its roots to classical economics and the international trade theories of Adam Smith and David Ricardo? A. Imperialist B. Conservative C. Free market D. Radical C. Free market Which political view allows FDI so long as the benefits outweigh the costs? A. The traditional view B. The pragmatic nationalist view C. The radical view D. The free market view B. The pragmatic nationalist view 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? A. The pure market view B. The free market view C. The radical view D. The pragmatic nationalist view D. The pragmatic nationalist view Why is it said that not all the new jobs created by FDI represent net additions in employment? A. Because of the uncertainty of the overall economic environment B. Because most of the job creation is indirect in nature C. Because jobs created by an investment may be offset by the jobs lost in domestic companies D. Because the unemployment rate more or less remains constant over the short-term C. Because jobs created by an investment may be offset by the jobs lost in domestic companies When a company brings capital and/or technology to a host country, the host country benefits from the: A. political effect of FDI. B. resource-transfer effect of FDI. C. balance-of-payments effect of FDI. D. bandwagon effect of FDI. B. resource-transfer effect of FDI. A country's _____ keeps track of its payments to and its receipts from other countries. A. federal payments ledgers B. concurrent accounts C. checks-and-balances accounts D. balance-of-payments accounts D. balance-of-payments accounts Which of the following arises when a country is importing more goods and services than it is exporting? A. Current account surplus B. Trade deficit C. Trade surplus D. Trade balance B. Trade deficit Which of the following arises when a country is exporting more goods and services than it is importing? A. Current account surplus B. Trade deficit C. Trade surplus D. Trade balance C. Trade surplus In which of the following situations would FDI improve the current account of the host country's balance of payments? A. If the foreign subsidiary imports a substantial number of its inputs from abroad B. If the FDI reduces existing employment opportunities C. If the FDI is a substitute for imports of goods or services D. If the FDI results in substitution of products produced domestically C. If the FDI is a substitute for imports of goods or services In which way can the source country's balance of payments benefit from an FDI made in a foreign country? A. From cash outflow during the initial investment to finance the FDI B. If the purpose of the foreign investment is to serve the home market from a low-cost production location C. From the inward flow of foreign earnings D. If FDI is a substitute for direct exports C. From the inward flow of foreign earnings How is the adverse effect of the balance of payments for the home country due to an FDI usually offset? A. By increased imports to the home country as a result of the FDI B. By the subsequent inflow of foreign earnings C. By substituting direct exports made earlier from the home country D. By further investments usually made to expand foreign operations B. By the subsequent inflow of foreign earnings FDI undertaken to serve the home market is known as: A. outsourcing. B. FDI substitution. C. offshore production. D. home market FDI. C. offshore production. How can FDI undertaken to serve the home market stimulate economic growth in the home country? A. By freeing home-country resources to concentrate on activities where the home country has a comparative advantage B. By importing more goods and services than it is exporting C. By circumventing trade barriers that may have prevented direct exports in the past D. By reducing demand for home-country exports of capital equipment, intermediate goods, and complementary products A. By freeing home-country resources to concentrate on activities where the home country has a comparative advantage What is double taxation in the context of FDI? A. Taxation at twice the normal rate for foreign companies B. Taxing the producers as well as suppliers C. Taxation of income in both home and host country D. Taxation of both income as well as dividends paid C. Taxation of income in both home and host country Which of the following is a home-country policy aimed at limiting outward FDI flow? A. Taxing domestic companies' foreign earnings at a higher rate than their domestic earnings B. Implementation of government-backed insurance programs to cover major types of foreign investment risk C. Eliminating double taxation of foreign income D. Persuading host countries to relax their restrictions on inbound FDI A. Taxing domestic companies' foreign earnings at a higher rate than their domestic earnings Licensing would be a good option for firms in which of the following industries? A. High-technology industries in which protecting firm-specific expertise is of paramount importance. B. Global oligopolies, in which competitive interdependence requires that multinational firms maintain tight control over foreign operations. C. Industries in which intense cost pressures require that multinational firms maintain tight control over foreign operations. D. In fragmented, low-technology industries in which globally dispersed manufacturing is not an option. D. In fragmented, low-technology industries in which globally dispersed manufacturing is not an option. _____ is essentially the service-industry version of licensing, although it normally involves much longer term commitments. A. Franchising B. Subsidizing C. Greenfield investment D. Patenting A. 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Intermediate Accounting14th EditionDonald E. Kieso, Jerry J. Weygandt, Terry D. Warfield 1,471 solutions Other Quizlet setsBUS 428 EXAM 142 terms Maxwell_Mircovich Financial Evaluation159 terms Tan_Nguyen19 Exam 3 - Ch 6 Practice Problems (Minus Math)78 terms brittanygrim Exam # 3 MAN4720197 terms Jonathan_Miller853 How can governments increase the attractiveness of FDI and licensing relative to exporting?By placing tariffs on imported goods, governments can increase the cost of exporting relative to foreign direct investment and licensing. Similarly, by limiting imports through quotas, governments increase the attractiveness of FDI and licensing.
Which of the following is a way in which governments increase the attractiveness of FDI and licensing relative to exporting group of answer choices?By limiting free flow of capital By limiting imports through quotas, governments increase the attractiveness of FDI and licensing. Identify the theory that seeks to explain why firms often prefer foreign direct investment over licensing as a strategy for entering foreign markets.
Why is FDI preferred over licensing and exporting?A firm will prefer FDI over exporting as a strategy to break into foreign markets when transportation costs or trade barriers make exporting unattractive, the firm will also favour FDI over licensing (or franchising) when it wishes to maintain control over its technological know how, or over its operations and business ...
How does the political economy influence the attractiveness of a country for FDI?Political economy research identifies two labor market effects that may drive FDI attitudes: the level of labor demand and the elasticity of labor demand. MNCs' productivity advantage translates into technological change that works to the particular advantage of skilled labor.
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How can governments increase the attractiveness of FDI and licensing relative to exporting quizlet?
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