Week 8 Flashcards
Who am I? (Inflows, Stock of FDI, Flow of FDI, Outflows)
a) The amount of FDI undertaken over a given time period?
b) Total accumulated value of foreign-owned assets at a given time
c) Flows of FDI out of a country
d) Flows of FDI into a country
a) Flow of FDI
b) Stock of FDI
c) Outflows
d) Inflows
FITB: FDI in the world economy trends
a) ____ in both flow and stock of FDI over past 30 years (increase/decrease)
b) ____ more rapidly than world trade and world output (growing/decreasing)
c) A way to circumvent ___ barriers
d) Driven by ___ and ___ changes
e) Shift toward ____ political institutions and ___ ___ economies
f) Globalization has had a ___ effect (positive/negative)
a) Increase
b) Growing
c) trade
d) political, economic
e) democratic, free market
f) positive
Which country is the largest source for FDIs since WWII?
US
Which 6 countries account for 60% of all FDIs outflows from 2000-2020
US, UK, France, Germany, Japan, the Netherlands
Which country became a major foreign investor around 2005, especially in less developed nations?
China
What are Greenfield investments? What are their benefits?
Establish a new operation in a foreign country. Acquire or merge with an existing company.
- Quicker to execute
- Can acquire valuable strategic assets
- Can increase the efficiency of the acquired unit by transferring capital technology or management skills
Name some alternatives to FDIs
Exporting, Licensing
Who am I? Producing goods at home and shipping to receiving country for sale
Exporting
Who am I? Granting a foreign entity the right to produce and sell a firm’s product in return for a royalty fee
Licensing
What are some limits to exporting?
Transportation costs and trade barriers. By limiting imports through quotas and tariffs, governments increase the cost of exporting and boost the attractiveness of FDI and licensing
What are some drawbacks to licensing?
-Giving away valuable technological know-how
- Does not give a firm the tight control over production, marketing, and strategy in a foreign country that may be required to maximize its profitability
- The firm’s competitive advantage is based on the management, marketing, and manufacturing capabilities, which are not amenable to licensing
What are some advantages of using FDIs over other methods? (3)
- When transportation costs or trade barriers make exporting unattractive
- When firms want to maintain control over technological know-how, operations, or business strategy
- When the firm’s capabilities are not amenable to licensing
What did Knickerbocker observe when examining the relationship between FDI and rivalry in oligopolistic industries?
Interdependence between firms leads to imitative behaviour. Imitative behaviour also occurs in FDI.
When does multipoint competition occur?
When 2 or more enterprises encounter each other in different regional or national markets
FITB: Eclectic paradigm?
a) Championed by British economist ___ ___
b) ___-___ advantages explain rationale for FDI
c) ____ for a firm to license its own unique capabilities and know-how (easy/difficult)
d) Combining location-specific assets or resource endowments with the firm’s own unique capabilities often requires ___ ___ ___.
e) Firms can benefit from externalities by…?
a) John Dunning
b) Location-specific
c) Difficult
d) Foreign direct investments
e) locating close to their source
FITB: Political ideology and FDI, radical view
a) roots in ___ political and economic theory
b) ____ ____ (_ _ _s) are an instrument of imperialist domination
c) Influential view from 1945-1980s, but…
a) Marxist
b) Multinational enterprises (MNEs)
c) no longer widely accepted
