Foreign Direct Investment

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Question 1

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A Japanese car manufacturer acquires an Italian producer of car tires.This is an example of a greenfield investment.

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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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Developing nations currently account for the largest share of FDI inflows.

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Question 4

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Other things being equal,the greater the capital investment in an economy,the more favorable its future growth prospects are likely to be.

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Question 5

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The majority of cross-border investment in the developed world is in the form of greenfield investments rather than mergers and acquisitions.

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Question 6

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Mergers and acquisitions are quicker to execute than greenfield investments.

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Question 7

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

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Question 8

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When transportation costs are added to production costs,it becomes unprofitable to ship some products over a large distance.This is particularly true of products that have a high value-to-weight ratio.

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Question 9

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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 10

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Internalization theory seeks to explain why firms often prefer foreign direct investment over licensing as a strategy for entering foreign markets.

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Question 11

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Licensing gives a firm tight control over manufacturing,marketing,and strategy in a foreign country that may be required to maximize its profitability.

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Question 12

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

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Question 13

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Rivals rarely imitate what a firm does in an oligopoly.

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Question 14

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Knickerbocker's theory explains why the first firm in an oligopoly decides to undertake FDI rather than to export or license.

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Question 15

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John Dunning pioneered the eclectic paradigm.

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Question 16

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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 17

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The radical view traces its roots to Marxist political and economic theory.

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Question 18

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The free market view argues that FDI is a benefit to both the source country and to the host country.

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Question 19

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In practice only a few countries country have adopted the free market view in its pure form.

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Question 20

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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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