Chapter 15 and 16

Question 1

Foreign Direct Investment (FDI)

Answer 1

An internalization strategy in which the firm establishes a physical presence abroad through acquisition of productive assets such as capital, technology, labor, land, plant, and equipment

Question 2

International Collaborative venture

Answer 2

a cross-border business alliance in which partnering firms pool their resources and share costs and risks to undertake a new business venture; also referred to as an “international partnership” or an “international strategic alliance”

Question 3

Joint Venture

Answer 3

A form of collaboration between two or more firms to create a new, jointly owned enterprise

Question 4

International Portfolio Investment

Answer 4

Passive Ownership of foreign securities such as stocks and bonds for the purpose of generating financial returns

Question 5

Greenfield investment

Answer 5

Direct investment to build a new manufacturing, marketing, or administrative facility, as opposed to acquiring existing facilities

Question 6

Acquisition

Answer 6

Direct investment to purchase an existing company or facility

Question 7

Merger

Answer 7

A special type of acquisition in which two firms join to form a new, larger firm

Question 8

Equity participation

Answer 8

Acquisition of partial ownership in an existing firm

Question 9

Wholly owned direct investment

Answer 9

A foreign direct investment in which the investor fully owns the foreign assets

Question 10

Equity joint venture

Answer 10

A type of partnership in which a separate firm is created through the investment or pooling of assets by two or more parent firms that gain joint ownership of the new legal entity

Question 11

Vertical integration

Answer 11

An arrangement whereby the firm owns, or seeks to own multiple stages of a value chain for producing, selling, and delivering a product or service

Question 12

Horizontal Integration

Answer 12

An arrangement whereby the firm owns or seeks to own, the activities performed in a single stage of its value chain

Question 13

Project-based nonequity venture

Answer 13

A collaboration in which the partners create a project with a relatively narrow scope and a well-defined timetable, without creating a new legal entity

Question 14

Consortium

Answer 14

A project-based, nonequity venture initiated by multiple partners to fulfill a large-scale project

Question 15

Cross-licensing agreement

Answer 15

A type of project-based, nonequity venture where partners agree to access licensed technology developed by the other of preferential terms

Question 16

Contractual entry strategies in international business

Answer 16

Cross-border exchanges where the relationship between the focal firm and its foreign partner is governed by an explicit contract

Question 17

Intellectual property

Answer 17

Ideas or works created by individuals or firms including discoveries and inventions, artistic, musical, and literary works, and words, phrases, symbols, and designs

Question 18

Intellectual property rights

Answer 18

The legal claim through which the proprietary assets of firms and individuals are protected from unauthorized use by other parties

Question 19

Licensing

Answer 19

Arrangement in which the owner of intellectual property grants a firm the right to use that property for a specific time period in exchange for royalties or other compensation

Question 20

Royalty

Answer 20

A free paid periodically to compensate a licensor for the temporary use of its intellectual property, often based on a percentage of gross sales generated from the use of the licensed asset

Question 21

Franchising

Answer 21

Arrangement in which the firm allows another the right to use an entire business system in exchange for fees, royalties, or other forms of compensation

Question 22

Know-how agreement

Answer 22

Contract in which the focal firm provides technological or management knowledge about how to design, manufacture, or deliver a product or a service

Question 23

Master franchise

Answer 23

Arrangement in which an independent company is licensed to establish, develop, and manage the entire franchising network in its market and has the right to subfranchise to other franchises, assuming the role of local franchisor

Question 24

Turnkey Contracting

Answer 24

Arrangement in which the focal firm or a consortium of firms plans, finances, organizes, manages, and implements all phases of a project abroad and then hands it over to a foreign customer after training local workers

Question 25

Build-operate-transfer (BOT)

Answer 25

Arrangement in which the firm or a consortium of firms contracts to build a major facility abroad, operate it for a specified period, and then transfer control to the project sponsor, typically the host-country government or public utility

Question 26

Management contract

Answer 26

Arrangement in which a contractor supplies managerial know-how to operate a hotel, hospital, airport, or other facility in exchange for compensation

Question 27

Infringement of intellectual property

Answer 27

Unauthorized use, publication, or reproduction of products or service protected by a patent, copyright, trademark, or other intellectual property right