Question Bank International Business
Chapter 07
Foreign Direct Investment
True / False Questions
1. (p. 242) A firm becomes a multinational enterprise when it undertakes foreign direct investment.
TRUE
2. (p. 242) Licensing involves the establishment of a new operation in a foreign country.
FALSE
3. (p. 242) If a firm that makes bicycles in Germany acquires a French bicycle producer, Greenfield investment has taken place.
FALSE
4. (p. 242) The amount of FDI undertaken over a given time period is known as the flow of FDI.
TRUE
5. (p. 242) The total accumulated value of foreign-owned assets at a given time is the inflow of FDI.
FALSE
6. (p. 242) FDI is seen by executives as a means of circumventing future trade barriers.
TRUE
7. (p. 244) Historically, most FDI has been directed at the developed nations of the world as firms based in advanced countries invested in the others' markets.
TRUE
8. (p. 246) The total amount of capital invested in factories, stores, office buildings and the like is referred to as the stock of FDI.
FALSE
9. (p. 246) The largest source country for FDI has been China.
FALSE
10. (p. 247) About 27 percent of the world's largest 100 nonfinancial multinationals in 2004 were American companies.
TRUE
11. (p. 247) In developing countries, about one third of FDI is in the form of mergers and acquisitions.
TRUE
12. (p. 248) In 2004, about two thirds of FDI stock was in service industries.
TRUE
13. (p. 249) As compared to exporting and licensing, FDI is the more expensive and risky.
TRUE
14. (p. 250) Internalization theory is also known as the market imperfections approach.
TRUE
15. (p. 250) One of the problems of licensing is that it may result in a firm's giving away valuable technological know-how to a potential foreign competitor.
TRUE
16. (p. 251) An oligopoly is an industry composed of a limited number of large firms.
TRUE
17. (p. 252) When two or more enterprises encounter each other in
Foreign Direct Investment
True / False Questions
1. (p. 242) A firm becomes a multinational enterprise when it undertakes foreign direct investment.
TRUE
2. (p. 242) Licensing involves the establishment of a new operation in a foreign country.
FALSE
3. (p. 242) If a firm that makes bicycles in Germany acquires a French bicycle producer, Greenfield investment has taken place.
FALSE
4. (p. 242) The amount of FDI undertaken over a given time period is known as the flow of FDI.
TRUE
5. (p. 242) The total accumulated value of foreign-owned assets at a given time is the inflow of FDI.
FALSE
6. (p. 242) FDI is seen by executives as a means of circumventing future trade barriers.
TRUE
7. (p. 244) Historically, most FDI has been directed at the developed nations of the world as firms based in advanced countries invested in the others' markets.
TRUE
8. (p. 246) The total amount of capital invested in factories, stores, office buildings and the like is referred to as the stock of FDI.
FALSE
9. (p. 246) The largest source country for FDI has been China.
FALSE
10. (p. 247) About 27 percent of the world's largest 100 nonfinancial multinationals in 2004 were American companies.
TRUE
11. (p. 247) In developing countries, about one third of FDI is in the form of mergers and acquisitions.
TRUE
12. (p. 248) In 2004, about two thirds of FDI stock was in service industries.
TRUE
13. (p. 249) As compared to exporting and licensing, FDI is the more expensive and risky.
TRUE
14. (p. 250) Internalization theory is also known as the market imperfections approach.
TRUE
15. (p. 250) One of the problems of licensing is that it may result in a firm's giving away valuable technological know-how to a potential foreign competitor.
TRUE
16. (p. 251) An oligopoly is an industry composed of a limited number of large firms.
TRUE
17. (p. 252) When two or more enterprises encounter each other in