CBA 300 Chapter 8 Exam with Questions and Answers
foreign direct investment (FDI) ANSWER the investment to acquire a lasting management interest (10% or more of voting stock) in an enterprise operating in a foreign country
- with FDI, a firm becomes a multinational enterprise
flow ANSWER - t...
CBA 300 Chapter 8 Exam with Questions
and Answers
foreign direct investment (FDI) ANSWER the investment to acquire a lasting management
interest (10% or more of voting stock) in an enterprise operating in a foreign country
- with FDI, a firm becomes a multinational enterprise
flow ANSWER - the amount of FDI over a given time period
- outflows and inflows
stock ANSWER total accumulated value of foreign-owned (owned by foreigners) assets at a
given time
transition economies ANSWER an economy changing from a centrally planned to a market
economy
patterns of FDI ANSWER advanced countries have been the largest recipients of FDI
FDI directed at developing nations and the transition economies (eastern Europe and the old
Soviet Union) have increased markedly
- matched inflows into developed nations for the first time in 2018
- the growing importance of China as a recipient of FDI
- Brazil and Mexico has been the top recipients of FDI in South America
in recent years, Chinese firms have emerged as major investors in Africa, particularly in
extraction industries
- to ensure supplies of valuable raw materials
, entry modes ANSWER exporting
- high transportation costs
- trade barriers
FDI can circumvent *trade barriers*
licensing (franchising) to a company in the host nation
- licensing: granting the right to produce and sell a product with a royalty fee. franchising is a
specialized form of licensing
establishing a joint venture with a local company
- most joint ventures are 50/50 partnerships
establishing a new operation by
- setting up a new operation (Greenfield investments)
- acquiring or merging an established firm
FDI: acquisitions ANSWER acquisitions or mergers with existing firms
- quicker, easier, and less risky to acquire assets
- can increase the efficiency of an acquired unit by transferring capital, technology, or
management skills
- accounts for less than 1/3 of FDI inflows into developing nations
FDI: greenfield investments ANSWER establishment of a *new* operation in a foreign
country
- 2/3 of FDI is greenfield investment in developing countries, due to fewer target firms to
acquire
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