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Terms in this set (59)The __ of FDI is the amount of FDI attempted over a period of time (usually one year). flow What are two reasons the United States has been an attractive target for FDI? stable economy The stock of foreign direct investment refers to the total accumulated value of foreign-owned assets at a given point in time. The text notes two reasons why FDI has outpaced world trade and world output. What are those two reasons? Despite the decline in trade barriers, firms still fear protectionist pressures. FDI has been driven by political and economic changes in developing nations. What are two alternatives to FDI? Licensing In the past, most foreign direct investment has been directed at _____ nations. developed The United States, the United Kingdom, the Netherlands, France, Germany, and Japan together have accounted for the majority of all FDI outflows for 1998-2018 for what two reasons? They provided the base for many of the largest and best-capitalized businesses. Exporting strategy does not work for a(n) __ value-to-weight ratio product that can be produced anywhere. low The ______ argues that combining location specific assets or resource endowments and the firm's own unique assets often requires FDI. eclectic paradigm The market imperfections approach is also known as the ______ theory. internalization The limits of ______ include giving away valuable know-how to competitors and losing control over marketing, production and strategy. licensing What are two limitations on exporting? transportation costs What is a feature of an oligopoly? Interdependence of major players Internalization theory is used to explain why a firm would prefer foreign direct investment over ______ as a strategy to enter a foreign market. licensing True or false: When RCA licensed its color television product to a number of Japanese companies in the 1960s, these companies turned around and entered the US to directly compete with RCA and diminished its role in the market. In this situation, licensing resulted in RCA giving away proprietary information to a potential competitor. True What are three advantages of FDI? Overcomes high transportation costs _____ are a network of informal contacts that allow companies to benefit from each other's knowledge. Externalities A(n) ______ is a market form in which a market or industry has a limited number of large firms. oligopoly The situation where multiple firms encounter each other in different regional markets, national markets or industries is called multi-point competition. The radical view toward FDI argues that MNE's extract ______ from the host country and take them back to their home country. profits John Dunning proposed that ______ are an important factor when explaining the nature of foreign direct investment. location-specific advantages Which view of FDI is based on the classical international trade theory of Smith and Ricardo asserting that international production should be based on comparative advantage? Free market True or false: A company that decides to locate operations close to other companies so it can take advantage of their knowledge is an example of how businesses use externalities. True An example of the pragmatic nationalist view is that the host country can gain in jobs and skills and the profits go to the ______ country. source Venezuela and Bolivia are examples of countries that have become more __ to FDI hostile
The ______ view of FDI states that international production should be allocated based on the theory of comparative advantage. free market What two positive contributions to a host country can FDI provide? Supply capital, technology & management resources A study of FDI by the Organization for Economic Cooperation and Development (OECD) found which two results? Foreign investors transferred technology to countries in which they invested. Which view of FDI states that there are benefits and costs to FDI and that countries attempt to maximize the benefits and minimize the national costs of FDI? Pragmatic nationalism What are two current trends in FDI? An increase in FDI aimed at countries that have liberalized their FDI regimes The ______ effects of FDI come when a multinational enterprise hires host-country citizens and ______ effects come when local suppliers hire workers as a result of the FDI. direct; indirect A(n) ______ effect has occurred when a company's FDI of capital, technology, and management resources create a positive contribution to a host country that might not otherwise be available. resource transfer Critics argue that not all new jobs created by FDI represent net additions in employment. This is due to the _____ effect where some jobs created are offset by jobs lost elsewhere. substitution A country's ___________ accounts track expenditures and receipts from other countries. balance-of-payments Tracking exports and imports of goods and services is measured by the __ account in BOP accounting current What are two long-term effects from increased competition? Increased productivity growth The 2,000 employees working in Toyota's factory in France are an example of the ______ effect of FDI on employment, while the 2,000 new jobs that were created in support industries are an example of the ______ effect of FDI on employment. direct, indirect Greenfield investing spurs competition by increasing the number of players in a market and this will tend to _____ prices and ______ economic welfare lower, increase Critics argue that FDI by Japanese auto makers does not make up for the jobs lost in US-based auto manufacturers. These critics are concerned with the substitution effect. What are two potential costs of FDI to host countries? Adverse effects on competition within the host nation The concern that an MNE could drive local firms out of business, monopolize the market, and raise prices above those that would prevail in competitive markets is more of a worry for ___ economies developing What two factors cause major adverse effects on a host country's balance of payments? A foreign subsidiary importing a large number of inputs from abroad The outflow of earnings from a foreign subsidiary to its parent company
When a firm invests in plant, equipment, and R&D as a result of increased competition, this is referred to as a(n) ______ investment. capital Fears of "economic ransom" are irrational, according to Robert Reich, because of the growing ______ of the world economy. interdependence True or false: When FDI occurs through greenfield investment, it will increase competition in a market and decrease economic welfare. False A host country cost of FDI could be the __ of sovereignty and autonomy loss When Crane Automotive Group developed operations in Italy, it not only built a manufacturing plant there but also imports parts from several other European nations. Which home country benefit of FDI does this represent? employment effects The idea that an MNE could come into a country and monopolize a market tends to be a greater concern in countries that have few large firms of their own. A key cost of FDI for the home country is when the balance of payments is adversely affected by the initial capital __ required to finance the FDI outflow Identify two costs of FDI to a home country. Balance of payments are negatively affected if purpose of FDI is to develop a low-cost production location. Balance of payments are negatively affected if FDI is a substitute for direct exports. Earnings from a foreign subsidiary to the parent company are recorded as ______ on the balance-of-payments accounts. capital outflow Most economists _____ the idea that FDI is usually accompanied by some loss of economic independence. dismiss FDI that serves the home market is called ______ production. domestic To encourage FDI, many countries have eliminated ______ taxation of foreign income. double Identify two benefits of FDI to a home country. Foreign subsidiary creates demand for home-country exports MNE learns skills from exposure to foreign market The board of directors of Green Garden Supply in Vermont voted to invest in a production facility in Mexico as a way to lower costs and free up financial resources for the company to grow in other areas. What form of FDI is this company using? offshore production Which country has a policy that encourages FDI? Country A has a government-backed insurance program to protect against the risk of expropriation. With the formation of the ______ in 1995, there now is a multinational institution that has become involved in regulations governing FDI. WTO What two factors would indicate that a firm has little bargaining power when considering FDI in a nation? the host government places a low value on what the firm has to offer the firm has only a short period of time to complete the negotiations Sets with similar termsIB 2000 CH881 terms katie_martin2 chapter 8: foreign direct investment31 terms Kady_Holland Chapter 8 -- Foreign Direct Investment51 terms moranb2 Chapter 8 Foreign Direct Investment38 terms garrett_thomas15 Sets found in the same folderInternational Business Chapter 8115 terms cgrimes1998 CH 10 The Foreign Exchange Market124 terms mmiyamo Chapter 4 Connect48 terms Chrishall2017 International Business - Ch 16158 terms brittanypriester Other sets by this creatorCH 1139 terms Chrishall2017 Ch 1085 terms Chrishall2017 E2 CH 740 terms Chrishall2017 The Shallows Chapter 7 & Digression9 terms Chrishall2017 Verified questionsQUESTION A firm with a WACC of 10% is considering the following mutually exclusive projects: $$ \begin{matrix} \text{ } & \text{0} & \text{1} & \text{2} & \text{3} & \text{4} & \text{5}\\ \text{Project 1} & \text{- \$ 200} & \text{\$ 75} & \text{\$ 75} & \text{\$ 75} & \text{\$ 190} & \text{\$ 190}\\ \text{Project 2} & \text{- \$ 650} & \text{\$ 250} & \text{\$ 250} & \text{\$ 125} & \text{\$ 125} & \text{\$ 125}\\ \end{matrix} $$ Which project would you recommend? Explain. Verified answer
QUESTION You have been asked to make arrangements for an off-site meeting for your company. A local hotel charges $250 to rent a conference room for a half day and$400 for a full day. The hotel charges $18 per person for each lunch served and$35 per person for each dinner served. How much will it cost to rent the conference room for two and one-half days and to provide lunch and dinner for 16 people for two days? Verified answer
QUESTION Why is some trade credit called free while other credit is called costly? If a firm buys on terms of 2/10, net 30, pays at the end of the 30th day, and typically shows $300,000 of accounts payable on its balance sheet, would the entire$300,000 be free credit, would it be costly credit, or would some be free and some costly? Explain your answer. No calculations are necessary. Verified answer
QUESTION Is it possible to construct a portfolio of real-world stocks that has a required return equal to the risk-free rate? Explain. Verified answer Other Quizlet setsExercise Science Lecture 527 terms summerankrumPLUS Unit 1 - First Nations - history21 terms MF24971999 Pathophysiology Exam 1145 terms riley_vickrey6 Land Use and Encumbrances27 terms veronica_luraPLUS Related questionsQUESTION Which strategy calls for a firm to target specific types of products for certain customer groups or regions? 6 answers QUESTION financing (characteristic of a growing entrepreneurial firm) 3 answers QUESTION the clandestine collection of trade secrets or proprietary information about a company's competitors 15 answers QUESTION How to Analyze a Country to Determine Suitability for Importing: 11 answers What are two reasons the United States has been an attractive target for FDI?The United States has been an attractive target for FDI partly because of its: stable and dynamic economy. Mergers and acquisitions differ from greenfield investments in that: the percentage of mergers and acquisitions is lower than greenfield investments in developing nations.
What are the two advantages of FDI?Increased Employment and Economic Growth
Increased FDI boosts the manufacturing as well as the services sector. This in turn creates jobs, and helps reduce unemployment among the educated youth - as well as skilled and unskilled labour - in the country.
What two positive contributions to a host country can FDI provide quizlet?Which of the following is one of the main benefits that FDI provides to the home country? The home country's balance of payments benefits from the inward flow of foreign earnings. Licensing is a good option to enter a foreign market when: tight control of the foreign operation is not required.
Why has FDI grown more rapidly than world trade?FDI has grown more rapidly than world trade and world output because: -firms still fear protectionist pressures. -2005 Chinese firms have started to emerge as major foreign investors. Most cross-border investment involves mergers and acquisitions rather than greenfield investments.
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What two reasons does the text give as to why fdi has outpaced world trade and world output?
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