L4

Question 1

Involvement foreign markets

Answer 1

License > export > own sales rep / sub > local assembly > FDI

Question 2

Psychic distance

Answer 2

the factors preventing or disturbing firms from learning about and understanding of a foreign environment”. These factors concern mostly differences in language, culture, political systems, level of education, or level of industrial development

Question 3

arm’s length transactions

Answer 3

only perform activities internal if they are better than buying

Question 4

Costs doing business abroad

Answer 4

= costs foreignness = liability foreignness

Question 5

Transaction costs

Answer 5

= using market = buying
–Search and information: finding supplier, checking price, quality, delays…
–Bargaining and decision: negotiation, drafting contract
–Policing and enforcing: legal, audit..

Question 6

Bounded rationality

Answer 6

restrained by cognitive limits to process information efficiently

Question 7

OLI framework + description + degree foreign involvement

Answer 7

1) ownership advantage = firm specific (patents/process) > YES FDI / export / license

2) internalization advantage = vertical/horizontal
integration thanks to market failure > NO license, only FDI / export

3) location advantage = external location specific (transport, government) > NO license / export, only FDI

Question 8

transaction governance (3) + description + cost dependence

Answer 8

market: supply-demand
- cost depends on: low uncertainty / frequency / asset specificity

hierarchy: unified owner
- cost depends on: medium uncertainty / frequency / asset specificity

hybrid: long-term contracts
- cost depends on: high uncertainty / frequency / asset specificity

Question 9

firm-specific advantages (7)

Answer 9

1) Physical resources (natural resources, buildings, plant equipment).
2) Financial resources (equity and loan capital)
3) Human resources (individuals and teams, entrepreneurial and operational skills).
4) Upstream knowledge (sourcing knowledge, product nd process-related technological knowledge).
5) Downstream knowledge (marketing, sales, distribution and after sales service).
6) Administrative knowledge (organizational structure, culture and systems).
7) Reputational resources (brand names, reputation for honest business dealings).

Question 10

location-bound FSAs (4)

Answer 10

1) stand-alone recourses + location advantages (priviliged retail location)
2) Local marketing knowledge and reputational resources (brand-name)
3) local best practices (buyer-supplier relations)
4) domestic recombination capability

Question 11

Location advantages

Answer 11

set of strengths of a location, and accessible by firms in that location. Relative to the strengths of other locations.