Foreign Direct Investment And Political Risk

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Question 1
Free
Multiple Choice

Based on observations of firms that have successfully invested abroad, we can conclude that one of the competitive advantages enjoyed by MNEs is:

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A

managerial expertise.

B

financial strength.

C

competitiveness of their home markets.

D

All of the above are competitive advantages.

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Question 2
Free
Multiple Choice

Based on observations of firms that have successfully invested abroad, we can conclude companies are more competitive when:

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A

facing sophisticated and demanding customers in the home market.

B

surrounded by a critical mass of related industries and suppliers.

C

located in countries that are naturally endowed with the appropriate factors of production.

D

All of the above are true.

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Question 3
Free
Multiple Choice

The OLI paradigm is an attempt to create a framework to explain why MNEs choose ________ rather than some other form of international venture.

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A

licensing

B

joint ventures

C

foreign direct investment

D

strategic alliances

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Question 4
Free
Multiple Choice

The O in OLI refers to an advantage in a firm's home market that is:

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A

operator independent.

B

owner-specific.

C

open-market.

D

official designation.

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Question 5
Free
Multiple Choice

The owner-specific advantages of OLI must be:

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A

firm-specific.

B

not easily copied.

C

transferable to foreign subsidiaries.

D

all of the above

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Question 6
Multiple Choice

A/An ________ would be an example of an owner-specific advantage for an MNE.

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A
patent
B
economy of scale
C
economy of scope
D
all of the above
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Question 7
Multiple Choice

The L in OLI refers to an advantage in a firm's home market that is a:

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A
liability in the domestic market.
B
location-specific advantage.
C
longevity in a particular market.
D
none of the above
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Question 8
Multiple Choice

A/An ________ would be an example of a location-specific advantage for an MNE.

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A
patent
B
economy of scale
C
unique source of raw materials
D
possession of proprietary information
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Question 9
Multiple Choice

The I in OLI refers to an advantage in a firm's home market that is an:

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A
internalization.
B
industry-specific advantage.
C
international abnormality.
D
none of the above
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Question 10
Multiple Choice

A/An ________ would be an example of an internalization advantage for an MNE.

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A
patent
B
economy of scale
C
unique source of raw materials
D
possession of proprietary information
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Question 11
Multiple Choice

In deciding whether to invest abroad, management must first determine whether the firm has a sustainable competitive advantage that enables it to compete effectively in the home market. The competitive advantage must be:

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A
firm specific.
B
not easily copied.
C
in a transferable form.
D
all of the above
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Question 12
Multiple Choice

Which of the following is NOT a market imperfection or genuine comparative advantage that attracts FDI to particular locations?

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A
low cost and productive labor force
B
unique sources of raw materials
C
defensive investments
D
an expansive monetary policy
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Question 13
True/False

A strongly competitive home market tends to dull the competitive advantage relative to firms located in less competitive home markets.

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True
False
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Question 14
True/False

Reactive financial strategies can be formulated in advance by the MNE's financial managers.

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True
False
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Question 15
True/False

Proactive financial strategies depend on discovering market imperfections.

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True
False
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Question 16
Essay

List and explain three strategic motives why firms could become multinationals and give an example of each.

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Question 17
Essay

What does the OLI Paradigm propose to explain? Define each component and provide an example of each.

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Question 18
Multiple Choice

Which of the following is NOT true regarding behavioral observations of firms making a decision to invest internationally?

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A
MNEs initially invest in countries with a similar "national psychic."
B
Firms eventually take greater risks in terms of the national psychic of countries in which they invest.
C
Initial investments tend to be much larger than subsequent ones.
D
All of the above have been observed.
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Question 19
Multiple Choice

Which of the following is NOT an advantage to exporting goods to reach international markets rather than entering into some form of FDI?

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A
fewer political risks
B
greater agency costs
C
lower front-end investment
D
All of the above are advantages.
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Question 20
Multiple Choice

Which of the following is an advantage to exporting goods to reach international markets rather than entering into some form of FDI?

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A
fewer agency costs
B
fewer direct advantages from research and development
C
a greater risk of losing markets to copycat goods producers
D
an inability to exploit R&D as effectively as if also invested abroad
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