Foreign Direct Investment

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Question 1

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The amount of foreign direct investment (FDI) undertaken over a given time period is known as the flow of FDI.

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Question 2

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FDI has been declining in the last few decades because protectionist pressures have become less intense.

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Question 3

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Mergers and acquisitions are quicker to execute than greenfield investments.

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Question 4

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Licensing involves the establishment of a new operation in a foreign country.

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Question 5

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By placing tariffs on imported goods, governments can increase the cost of exporting relative to foreign direct investment and licensing.

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Question 6

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An oligopoly is an industry composed of a limited number of large firms.

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Question 7

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Rivals rarely imitate what a firm does in an oligopoly.

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Question 8

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John Dunning pioneered the eclectic paradigm.

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Question 9

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According to the pragmatic nationalistic view, the MNE is a tool for exploiting host countries to the exclusive benefit of their capitalist-imperialist home countries.

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Question 10

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Only a few countries have adopted the free market view in its pure form.

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Question 11

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Countries adopting a pragmatic stance pursue policies designed to maximize the national benefits and minimize the national costs.

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Question 12

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Research supports the view that multinational firms often transfer significant technology when they invest in a foreign country.

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Question 13

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Direct effects of FDI arise when jobs are created in local suppliers as a result of the FDI and when jobs are created because of increased local spending by employees of the MNE.

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Question 14

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Governments normally are concerned when their country is running a surplus on the current account of their balance of payments.

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Question 15

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In general, FDI in the form of greenfield investments should increase competition.

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Question 16

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For the home country, the current account of the balance of payments improves if the purpose of the foreign investment is to serve the home market from a low-cost production location.

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Question 17

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Offshore production refers to FDI undertaken to serve the host market.

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Question 18

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The WTO supports the promotion of international trade in services.

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Question 19

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One way countries have encouraged firms to undertake FDI is through double taxation.

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Question 20

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The British advanced corporation tax system taxed British companies' foreign earnings at a higher rate than their domestic earnings. This tax code created an incentive for British companies to invest abroad.

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