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Terms in this set (38)_____________________: occurs when a firm invests directly in new facilities to produce or market in a foreign country Foreign direct investment (FDI) A firm engaged in FDI is a ______________________ multinational enterprise There are two forms of FDI: A ________________ - the establishment of a wholly new operation in a foreign country _______________ with an existing firm in the foreign country greenfield investment, Buying/Merging The stock of FDI - the total accumulated value of ______________________ at a given time foreign-owned assets FDI has grown more rapidly than world trade and world output because: Firms still fear _______________ policies The shift toward democratic political institutions and _______________ economies encourages FDI ____________ is prompting firms to ensure they have a significant presence in many regions of the world protectionist, free market, Globalization
Historically, most FDI has been directed at the ___________ nations of the world. The United States is a favorite target as is the European Union. More recently, _________ nations have been the recipients of FDI developed, developing Since World War II, ___________ has been the largest source country for FDI. Other important source countries - the United Kingdom, the Netherlands, France, Germany, and Japan. Chinese firms have recently emerged as major foreign investors. America Most cross-border investment involves mergers and acquisitions rather than ___________________ greenfield investments Acquisitions are attractive because: They are _______ to execute than greenfield investments It is easier and less risky for a firm to acquire ___________ than build them from the ground up Firms believe they can increase the ________ of an acquired unit by transferring capital, technology, or management skills quicker, desired assets, efficiency ____________ - granting a foreign entity the right to produce and sell the firm's product in return for a royalty fee on every unit that the foreign entity sells Licensing When transportation costs are high, exporting can be ______________ unprofitable ____________ theory (also known as market imperfections) suggests: Licensing could result in a firm's giving away valuable technological ________ to a potential foreign competitor Licensing does not give a firm the _________ over manufacturing, marketing, and strategy in a foreign country that may be required to maximize its profitability Licensing may be difficult if the firm's ___________________ is not amendable to it internalization, know-how, tight control, competitive advantage FDI will be favored over exporting when: Transportation costs are _____ high, high FDI will be favored over licensing when: The firm wants control over its __________________ The firm wants control over its __________ and business strategy The firm's capabilities are not amenable to _________ technological know-how, operations, licensing ____________explored the relationship between FDI and rivalry in oligopolistic industries (industries composed of a limited number of large firms). FDI flows reflect ____________ between firms. Knickerbocker, strategic rivalry Knickerbocker's theory can be extended to _________________ multipoint competition ________________: when two or more enterprises encounter each other in different regional markets, national markets, or industries multipoint competition _______ discovered firms undertake FDI at particular stages in the life cycle of a product they have pioneered. Firms invest in other advanced countries when ____________ in those countries grows large enough to support local production Firms shift production to low-cost developing countries when product standardization and market saturation create ______________ and ______________ Vernon, local demand, price competition, cost pressures __________ eclectic paradigm - _______________ advantages - arise from using resource endowments or assets that are tied to a particular location and that a firm finds valuable to combine with its own unique assets ______________ - knowledge spillovers that occur when companies in the same industry locate in the same area Dunning's , Location-specific, Externalities The radical view - the MNE is an instrument of __________________ and a tool for exploiting host countries to the exclusive benefit of their capitalist-imperialist home countries imperialist domination The free market view - international production should be distributed among countries according to the theory of _____________________. Countries should specialize in the production of goods and services they can produce __________ The MNE increases the overall efficiency of the world economy comparative advantage, most efficiently The ___________________ view - FDI has benefits, (inflows of capital, technology, skills and jobs) and costs (repatriation of profits to the home country and a negative balance of payments effect). FDI should be allowed only if the benefits outweigh the costs pragmatic nationalist In recent years, there has been a strong shift toward the _____________ stance creating: A surge in the volume of FDI worldwide An increase in the volume of FDI directed at countries that have recently liberalized their regimes But, some countries are becoming more hostile to FDI free market __________________ Effects: FDI can bring capital, technology, and management resources that would otherwise not be available Resource Transfer ______________ Effects: FDI can bring jobs that would otherwise not be created there Employment The ________________ account records a country's payments to and receipts from other countries. The current account records a country's export and import of goods and services. A surplus is usually favored over a deficit. balance-of-payments FDI can help achieve a current account surplus: If it is a __________ for imports of goods and services If the MNE uses a ______________ to export goods and services to other countries substitute, foreign subsidiary FDI in the form of ________________: greenfield investment Adverse Effects on Competition: The subsidiaries of foreign MNEs may have greater _________________ than indigenous competitors because they may be part of a larger international organization The MNE could draw on funds generated elsewhere to subsidize costs in the local market. Doing so could allow the MNE to drive indigenous competitors out of the market and create a ____________ position. economic power, monopoly There are two possible adverse effects of FDI on a host country's balance-of-payments: The capital outflows as foreign subsidiaries __________ earnings to the parent country There is a ____ on the current account of the host country's balance of payments associated with imports of input products by the foreign subsidiary repatriate, debit FDI can mean some loss of ______________. Key decisions that can affect the host country's economy will be made by a foreign parent that has no real commitment to the host country, and over which the host country's government has no real control. economic independence The balance-of-payments: The balance of payments suffers from the initial capital outflow required to finance the FDI The current account is ________________ if the purpose of the FDI is to serve the home market from a low-cost production location The current account suffers if the FDI is a ___________ for direct exports negatively affected, substitute Many nations : Have eliminated ____________ of foreign income insurance, double taxation _____________ - exclude foreign firms from certain sectors on the grounds of national security or competition Ownership restraints ___________________ - used to maximize the benefits and minimize the costs of FDI for the host country Performance requirements The location-specific advantages argument associated with _____________ help explain the direction of FDI Dunning However, ___________________ is needed to explain why firms prefer FDI to licensing or exporting. _________ is preferable to ________ and FDI as long as transportation costs and trade barriers are low. internalization theory, Exporting, Licensing Licensing is unattractive when: The firm's proprietary property cannot be properly __________ by a licensing agreement The firm needs _________ over a foreign entity in order to maximize its market share and earnings in that country The firm's skills and capabilities are not amenable to licensing protected, tight control Students also viewedChapter 854 terms HarryBinh Chapter 816 terms Sean_OKane Chapter 8 International Business85 terms Zeiry_Carrillo International Business Chapter 8115 terms cgrimes1998 Sets found in the same folderChapter 340 terms aung_kyaw_min Global Business83 terms cayla_andican6 International Business, Chapter 11 - International…34 terms peter_guidash International Business Ch.217 terms dman558 Other sets by this creatorPowerPoint - Ch. 1162 terms rossgh2992 PowerPoint - Ch. 1069 terms rossgh2992 PowerPoint - Ch. 960 terms rossgh2992 PowerPoint - Ch. 855 terms rossgh2992 Verified questions
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Which country has consistently been the largest source of fdi since world war ii?
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