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WorksheetsChapter 7 : Foreign Direct Investment
Total questions: 20
Worksheet time: 10mins
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
Which is NOT TRUE about the primary costs of FDI to host countries are:
Loss of sovereignty and patriotism
Capital outflow
Adverse effects on competition and exports.
A low-cost production location
What is the most important concerns of home country costs?
The balance of payments.
Resource – Transfer Effects
Adverse Effects on Competition
Effect on Economic Growth
What impact could increased productivity growth, product and process innovations, and greater economic growth?
Resource – Transfer Effects
Balance of Payments Effects
Employment Effects
Effect on Competition and Economic Growth
What are the benefits of FDI to host countries?
Repatriated earnings from profits from FDI
Learning via FDI from operations abroad
Increased exports of components and services to host countries
Access to management expertise, skills and technology
Identify the theory that seeks to explain why firms often prefer FDI over licensing as a strategy for entering foreign market
Internationalization theory
Raymond Vernon’s theory
Dunning’s theory
Knickerbocker’s theory
Historically, political ideology toward FDI within a nation has ranged from a dogmatic radical stance that is hostile to all inward FDI at one extreme to an adherence to the noninterventionist principle of free market economics at the other. Between these two extremes is an approach that might be called :
The Radical View
Pragmatic Nationalism
The Free Market View
Shifting Ideology
Choose the wrong answer
The free market view argues that :
FDI by the MNE increases the overall efficiency of the world economy.
International production should be distributed among countries according to the theory of comparative advantage
The multinational enterprise (MNE) is an instrument of imperialist domination
the MNE is an instrument for dispersing the production of goods and services to the most efficient locations around the globe
Radical writers argue that :
MNEs extract profits from the host country and take them to their home country, giving nothing of value to the host country in exchange
International production should be distributed among countries according to the theory of comparative advantage
The MNE is an instrument for dispersing the production of goods and services to the most efficient locations around the globe
FDI by the MNE increases the overall efficiency of the world economy
The pragmatic nationalist view is that FDI has
benefits
boths benefits and costs
cost
brought nothing
Which form is not FDI?
investment made to develop a production or manufacturing plant from the ground up (“greenfield investments”)
mergers and acquisitions
licensing
joint ventures
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