Chapter 7 : Foreign Direct Investment

Forms of international investment are:

• Investing in enterprises with 100% international capita

• International franchising

• International franchising

• Exporting goods

A company that invests investment (in the form of product marketing or manufacturing subsidiaries) into many countries is called ________.

• Direct export company

• Foreign company

• Multinational company

• Company with global business relationship

What types of risks are insured through?

• Deprived of ownership, Damage due to war

• Inability to return profits to the country itself, Deprived of ownership

• Damage due to war, Inability to return profits to the country itself

• Deprived of ownership, Damage dut to war, Inability to return profits to the country itself

How does the UK have policies to control outward FDI over time ?

• Prohibition of FDI

• Promote liberalization of FDI management regulations

• Exchange control to limit the amount of capital that businesses can take out of the country.

• Remove certain fields

Why do people think franchising is preferred to FDI?

• The business has a valuable secret that the licensing contract cannot adequately protect

• Less expensive, less risky

• Strictly control foreign business entities

• The skills of the business follow a franchise

The establishment of a wholly new operation in a foreign country is called:

• An acquisition

• A merger

• A greenfield investment

• A multinational venture

Most FDI is direct toward:

• China

• The United States

• Emerging economies

• Developed countries

Benefits of FDI include all of the following except:

• The resource transfer effect

• The employment effect

• The balance of payments effect

• National sovereignty and autonomy

What does the Gross Fixed Capital Formation describe?

• Comparison of the inflows and outflows of FDI

• Summarization of the total amount invested in facilities (such as factories, stores, buildings, etc…)

• Summarization of the total amount invested in other nations

• Differentiation between the flow and the stock of FDI

Which of the following is not a cost of outward FDI for host countries?

• The effect on employment is FDI is a substitute for domestic production

• When FDI is a substitute for direct exports

• The initial capital outflow required to finance the FDI

• Gains from learning valuable skills from foreign markets