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Global Business > Tutorial 5 > Flashcards

Tutorial 5 Flashcards

1
Q

Chapter 5

trade in goods (merchandise trade)

A

Sale of physical goods across national borders.

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2
Q

Chapter 5

trade in services

A

Sale of intangibles across national borders.

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3
Q

Chapter 5

trade deficit

A

An economic condition in which a nation imports more than it exports.

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4
Q

Chapter 5

trade surplus

A

An economic condition in which a nation exports more than it imports.

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5
Q

Chapter 5

balance of trade

A

The aggregation of importing and exporting that leads to the country-level trade surplus or deficit.

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6
Q

Chapter 5

classic trade theories

A

The major theories of international trade advanced before the mid-20th century: mercantilism, absolute advantage, comparative advantage and factor endowments.

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7
Q

Chapter 5

Classic theory: theory of mercantilism

A

A theory that holds that
the wealth of the world (measured in gold and silver) is fixed and that a nation that exports more and imports less would enjoy the net inflows of gold and silver and thus become richer

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8
Q

Chapter 5

free trade

A

Trade uninhibited by trade barriers.

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9
Q

Chapter 5

Classic theory: theory of absolute advantage

A

A theory that suggests
that under free trade, each nation gains by specializing in economic activities
in which it has absolute advantage.

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10
Q

Chapter 5

absolute advantage

A

The economic advantage one nation enjoys due to higher productivity in an economic activity

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11
Q

Chapter 5

modern trade theories

A

The major theories of international trade advanced in the second half of the 20th century: product life cycle, strategic trade and national competitive advantage.

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12
Q

Chapter 5

classic theory: theory of comparative advantage

A

A theory that focuses on the relative (not absolute) advantage in one economic activity that one nation enjoys in comparison with other nations.

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13
Q

Chapter 5

comparative advantage

A

Relative (not absolute) advantage in one economic activity that one nation enjoys in comparison with other nations.

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14
Q

Chapter 5

opportunity costs

A

Given the alternatives (opportunities), the cost of pursuing one activity at the expense of another activity.

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15
Q

Chapter 5

classic theory: factor endowment theory (or Heckscher–Ohlin theory)

A

A theory that suggests nations will develop comparative advantage based on their locally abundant factors.

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16
Q

Chapter 5

resource(factor) endowents

A

The extent to which different countries possess various resources (factors), such as labour, land and technology.

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17
Q

Chapter 5

modern theory: product life cycle

A

A theory that accounts for changes in the patterns of trade over time by focusing on product life cycles.

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18
Q

Chapter 5

modern theory: strategic trade theory

A

A theory that suggests that strategic intervention by governments in certain industries can enhance their odds for international success.

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19
Q

Chapter 5

first mover advantage

A

Advantages that first entrants enjoy and do not share with late entrants.

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20
Q

Chapter 5

modern theory: theory of national competitive advantage industries (diamond model)

A

A theory that suggests that the competitive advantage of certain industries in different nations depends on four aspects that form a ‘diamond’.

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21
Q

Chapter 5

resource mobility

A

The ability to move resources from one part of a business to another.

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22
Q

Chapter 5

protectionism

A

Government policies designed to protect a domestic industry from foreign competition.

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23
Q

Chapter 5

deadweight loss

A

Net losses that occur in an economy as the result of tariffs

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24
Q

Chapter 5

non tariff barries

A

Government policies designed to protect a domestic industry from foreign competition

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25
Q

Chapter 5

subsidies

A

Government payments to (domestic) firms.

26
Q

Chapter 5

import quotas

A

Restrictions on the quantity of imports.

27
Q

Chapter 5

anti dumping duties

A

Costs levied on imports that have been ‘dumped’ (selling below costs to ‘unfairly’ drive domestic firms out of business).

28
Q

Chapter 5

public procurement

A

Units of government buying products or services.

29
Q

Chapter 5

local content requirements

A

A requirement that value added is created locally.

30
Q

Chapter 5

infant industry argument

A

The argument that temporary protection of young industries may help them to attain international competitiveness in the long run.

31
Q

Chapter 5

trade embargos

A

Politically motivated
trade sanctions against foreign countries to signal displeasure

32
Q

Chapter 6

foreign direct investements (FDI)

A

Investment in, controlling and managing value-added activities in other countries.

33
Q

Chapter 6

emerging enconomy MNEs

A

MNEs that originate from an emerging economy and are headquartered there.

34
Q

Chapter 6

foreign portfolio investements (FPI)

A

Investment in a portfolio of foreign securities such as stocks and bonds.

35
Q

Chapter 6

joint venture

A

Operations with shared ownership by several domestic or foreign companies

36
Q

Chapter 6

horizontal FDI

A

FDI that creates operations abroad at the same position in the value chain as the operation in the home country.

37
Q

Chapter 6

vertical FDI

A

FDI in operations in different stages of the value chain, upstream or downstream.

38
Q

Chapter 6

upstream vertical FDI

A

FDI in an upstream stage of the value.

39
Q

Chapter 6

downstream vertical FDI

A

FDI in a downstream stage of the value chain in two different countries.

40
Q

Chapter 6

FDI flow

A

The amount of FDI moving in a given period (usually a year) in a certain direction.

41
Q

Chapter 6

FDI stock

A

The total value of inbound FDI in a country or outbound FDI from a country operating at a given point in time.

42
Q

Chapter 6

OLI paradigm

A

A theoretical framework positing that ownership (O), location (L) and internalization (I) advantages combine to induce firms to engage in FDI.

  1. Ownership advantages: What does the firm own that allows it to overcome its liability of foreignness when competing with local firms in their country?
  2. Locational advantages: What does the host location have to offer that allows the firm to create more value than it would by purely operating in its home country?
  3. Internalization advantages: What advantages does the firm get from directly owning the operation abroad rather than relying on contracts and markets as means of exchange?
43
Q

Chapter 6

liability of foreignness

A

The inherent disadvantage a firm faces when competing with local firms in a foreign country.

44
Q

Chapter 6

ownership advantage

A

Resources of the firm that are transferable across borders and enable the firm to attain competitive advantages abroad.

45
Q

Chapter 6

location advantage

A

An advantage enjoyed by firms operating in certain locations.

46
Q

Chapter 6

agglomeration

A

The location advantages that arise from the clustering of economic activities in certain locations

47
Q

Chapter 6

knowledge spillovers

A

Knowledge diffused from one firm to others among closely located firms

48
Q

Chapter 6

internalization advantage

A

Advantages of organizing activities within a multinational firm rather than using a market transaction.

49
Q

Chapter 6

market failure

A

Imperfections of the market mechanism that make some transactions prohibitively costly

50
Q

Chapter 6

intra firm trade

A

International trade between two subsidiaries in two countries controlled by the same MNE

51
Q

Chapter 6

licensing

A

A contract by which a firm allows another firm to use its intellectual property rights in return for a fee.

52
Q

Chapter 6

franchising

A

A contract by which a firm allows another firm to
use its branded service or products in return for a fee.

53
Q

Chapter 6

dissemination risk

A

The risk associated with unauthorized diffusion of firm-specific know-how.

54
Q

Chapter 6

local content requirements

A

Requirement that a certain proportion of the value
of the goods made in a country originates from that country.

55
Q

Chapter 6

tax avoidance

A

Reducing tax liability by legally moving profits to jurisdictions where tax rates are lower

56
Q

Chapter 6

bargaining power

A

The ability to extract a favourable outcome from negotiations due to one party’s strengths

57
Q

Chapter 6

obsolescing bargain

A

Refers to the deal struck
by MNEs and host governments which change their requirements after the initial FDI entry.

58
Q

Chapter 6

sunk costs

A

Up-front investments that are non-recoverable if the project is abandoned.

59
Q

Chapter 6

expropriation

A

Government confiscation of private (foreign-owned) assets.

60
Q

Chapter 6

state owned enterprise(SOEs)

A

Companies with direct ownership by the state.

61
Q

Chapter 6

soft budget constraint

A

Phenomenon that SOEs tend to receive extra resources from the state when facing financial difficulties.

62
Q

Chapter 6

sovereign wealth fund(SWF)

A

A state-owned investment fund composed of financial assets such as stocks, bonds, real estate or other financial instruments.

Global Business (8 decks)

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