Chapter 6 Flashcards
The name of Chapter 6
Entering Foreign Markets
liability of foreignness
The inherent disadvantage foreign firms experience in host countries because of their nonnative status
dissemination risk
The risk associated with the unauthorized diffusion of firm-specific assets
regulatory risk
Risk associated with unfavorable government regulations
obsolescing bargain
A deal struck by an MNE and a host government, which changes the requirements after the entry of the MNE
trade barrier
Barrier blocking international trade
tariff barrier
Taxes levied on imports
trade war
A country imposes tariffs or quotas on imports and other countries retaliate with similar forms of trade protectionism
nontariff barrier
Trade and investment barriers that do not entail tariffs
currency risk
Risk stemming from exposure to unfavorable movements of the currencies
currency hedging
A transaction that protects traders and investors from exposure to the fluctuations of the spot rate
strategic hedging
Spreading out activities in a number of countries in different currency zones to offset any currency losses in one region through gains in other regions
location-specific advantage
Advantage associated with operating in a specific location
agglomeration
Clustering economic activities in certain locations
first-mover advantage
Advantage that first movers enjoy and later movers do not
late-mover advantage
Advantage associated with being a later mover
First-Mover Advantages Examples in the Text
Proprietary, technological leadership
- Apple’s iPhone
Relationships with key stakeholders such as governments
- Citigroup
- JP Morgan Chase
Avoidance of clashes with dominant firms at home
- Sony
- Honda
Late-Mover Advantages Examples in the Text
- Amazon free rides on Flipkart’s investment in educating customers in India
- Tesla as well as BMW, GM, and Toyota wait until the Nissan Leaf resolves technical uncertainties
- Greyhound is stuck with the bus depots, whereas Megabus simply uses curbside stops
scale of entry
The amount of resources committed to foreign market entry
nonequity mode
Mode of foreign market entry that does not involve the use of equity
equity mode
Mode of foreign market entry that involves the use of equity
ownership advantage
Advantage associated with directly owning assets overseas
internalization
The process of replacing a market relationship with
a single multinational organization spanning both countries
internalization advantage
Advantage associated with replacing a market relationship with an internal organization
OLI advantages
Ownership, location, and internalization advantages, which are typically associated with MNEs
entry mode
A form of operation that a firm employs to enter foreign markets
turnkey project
Project in which clients pay contractors to design and construct new facilities and train personnel
build-operate-transfer (BOT) agreement
A special kind of turnkey project in which contractors first build facilities, operate them for a period of time, and then transfer them back to clients
research and development (R&D) contract
Outsourcing agreements in R&D between firms
co-marketing
Agreements among a number of firms to jointly market their products and services
joint venture (JV)
A “corporate child” is a new entity is jointly owned by two or more parent companies
wholly owned subsidiary (WOS)
Subsidiary located in a foreign country that is entirely owned by the MNE
greenfield operation
Building factories and offices from scratch (on a proverbial piece of “greenfield” formerly used for agricultural purposes)
country-of-origin effect
The positive or negative perception of firms and products from a certain country
LLL advantages
Linkage, leverage, and learning advantages, which are typically associated with MNEs from emerging economies
reciprocity
An informal agreement based on mutual exchange of gratifications
institutional void
Institutional conditions of a country lacking market-supporting infrastructure
