Chapter 1
Expanding abroad:
Motivations, means, and mentalities
True/False
1. The largest MNEs are equivalent in their economic importance\ to\ less\ developed\ economies\
such\ as\ Nigeria,\ Moldova,\ or\ Jamaica.
ANS:False\ (Sales\ of\ the\ largest\ MNEs\ exceed\ the\ GDPs\ of\ less\ developed\ countries.)\
Difficulty:\ Moderate
Pg:\ 16\ and\ Table\ 1.3\ (16)
Subject:\ MNE\ influence\ in\ the\ global\ economy
2. The\ process\ of\ internationalization\ followed\ by\ most\ firms\ is\ usually\ well-thought\ out\ in\
advance\ and\ typically\ builds\ on\ a\ combination\ of\ rational\ analysis,\ planning\ and\
implementation.
ANS:False\ (It\ is\ more\ likely\ a\ combination\ of\ rational\ analysis,\ opportunism,\ and\ luck.\ In\
regards\ to\ opportunism,\ several\ studies\ have\ found\ that\ most\ firms\ begin\ exporting\ due\ to\
an\ unsolicited\ export\ order.)
Difficulty:\Moderate\
Pg:\ 22-23
Subject:\ The\ Process\ of\ Internationalization
3. All\ companies\ internationalize\ in\ an\ incremental\ manner.\ First,\ they\ make\ an\ initial\
commitment\ of\ resources\ to\ the\ foreign\ market\ in\ order\ to\ secure\ local\ market\ knowledge.\
Building\ on\ this\ knowledge,\ they\ make\ subsequent\ resource\ commitments,\ eventually\
leading\ to\ higher\ levels\ of\ investment\ in\ the\ foreign\ market.
ANS:False\ (There\ are\ many\ exceptions\ to\ the\ incremental\ approach.\ Some\ firms\ are\ “born\
globals”.\ Other\ firms\ retain\ the\ same\ mode,\ including\ level\ of\ subsidiary\ involvement,\ in\ all\
foreign\ markets.)
Difficulty:\Moderate\
Pg:\ 23
Subject:\ The\ Process\ of\ Internationalization
4. A\ joint\ venture\ is\ a\ contractual\ mode\ of\ foreign\ entry\ involving\ a\ high\ level\ of\ resource\
commitment\ by\ all\ partners.
ANS:False\ (A\ JV\ will\ not\ typically\ require\ as\ high\ a\ resource\ commitment\ as\ we\ would\ see\ in\
wholly\ owned\ subsidiaries.\ In\ addition,\ there\ is\ significant\ variability\ in\ the\ level\ of\
resources\ contributed\ by\ partners.)
1
,Difficulty:\ Moderate\ Pg:
24\ (Figure\ 1.2)\ Subject:
Foreign\ entry\mode
5. Emerging\ motivations\ for\ internationalization\ include\ the\ desire\ to\ enhance\ the\ firm’s\
competitive\ position\ and\ the\ desire\ to\ develop\ global\ scanning\ capabilities.
ANS:True\
Difficulty:
ModeratePg:
19-20
Subject:\ Emerging\ Motivations
6. For\ an\ MNE\ to\ exist,\ first\ foreign\ countries\ must\ provide\ location-specific\ advantages\ to\
attract\ the\ company\ to\ invest\ there,\ second\ the\ company\ must\ have\ ownership-specific\
advantages\ that\ counteract\ its\ liability\ of\ foreignness,\ third\ the\ company\ must\ have\ the\
organizational\ capability\ to\ leverage\ its\ strategic\ advantages\ more\ effectively\ internally\than\
externally.
ANS:True\
Difficulty:\Moderate\
Pg:\ 22
Subject:\ Prerequisites\ for\ internationalization
7. An\ MNE\ with\ an\ ‘international\ mentality’\ will\ typically\ be\ managed\ as\ a\ coordinated\
federation.
ANS:True\
Difficulty:\Moderate\
Pg:\ 26
Subject:\ The\ evolving\ mentality:\ international\ to\ transnational
8. An\ MNE\ with\ a\ ‘multinational\ mentality’\ will\ typically\ be\ managed\ as\ a\ coordinated\
federation.
ANS:False\ (It\ will\ typically\ be\ managed\ as\ a\ decentralized\ federation.)Difficulty:\
Moderate
Pg:\ 26-27
Subject:\ The\ evolving\ mentality:\ international\ to\ transnational
9. An\ MNE\ with\ a\ ‘global\ mentality’\ will\ typically\ manage\ its\ operations\ centrally.
2
,ANS:True\
Difficulty:\Moderate\
Pg:\ 27
Subject:\ The\ evolving\ mentality:\ international\ to\ transnational
10. An\ MNE\ with\ a\ ‘transnational\ mentality’\ will\ typically\ be\ managed\ as\ an\ integrated\ network.
ANS:True\
Difficulty:\Moderate\
Pg:\ 27
Subject:\ The\ evolving\ mentality:\ international\ to\ transnational
11. The\ core\ advantage\ multinational\ mentality\ has\ over\ global\ mentality\ is\ more\ efficient\
manufacturing.
ANS:False\ (it\ is\ the\ other\ way\ around)Difficulty:
Moderate\
Pg:\ 26-27
Subject:\ The\ evolving\ mentality:\ international\ to\ transnational
12. Raymond\ Vernon’s\ article\ “Gone\ are\ the\ cash\ cows\ of\ yesteryear”\ highlights\ a\ company’s\
global\ scanning\ and\ learning\ capability.
ANS:True\
Difficulty:\Hard
Pg\ 19\ (footnote\ 10)
Subject:\ Emerging\ Motivations
13. Only\one\ article\ further\ develops\ the\ idea\ that\ “the\ process\ of\ developing\ these\ strategic\ and\
organizational\ attributes\ lies\ at\ the\ heart\ of\ the\ internationalization\ process\ through\ which\
a\ company\ builds\ its\ position\ in\ world\ markets.
ANS:False\ (2\ articles\ further\ develop\ the\ idea:\ A.\ Jonsson\ and\ N.\ J.\ Foss,\ “International\
expansion\ through\ flexible\ replication:\ learning\ from\ the\ internationalization\ experience\
of\ IKEA,”\ Journal\ of\ International\ Business\ Studies,\ 42:9\ (2011),
1079–1102\ and\ J.\ W.\ Lu\ and\ P.\ W.\ Beamish,\ “International\ diversification\ and\ firm\
performance:\ the\ S-curve\ hypothesis,”\ Academy\ of\ Management\ Journal,\ 47:4\ (2004),\ 598–609.)\
Difficulty:\ Hard
Pg:\ 22-23\ (footnote\ 15)
Subject:\ Process\ of\ Internationalization
3
, Multiple\ Choice
14. An\ MNE\ is\ a(n):
a. import-export\ company\ that\ actively\ trades\ in\ foreign\ markets.
b. company\that\ passively\ manages\ its\ substantial\ foreign\ direct\ investment.
c. import-export\ company\ that\ actively\ manages\ its\ foreign\ investment\ portfolio.
d. company\that\ actively\ manages\ substantial\ foreign\ direct\ investment.
ANS:d\ (A\ true\ MNE\ is\ a\ company\that\ has\ substantial\ direct\ investment\ in\ foreign\ countries,\
and\ that\ actively\ manages\ and\ regards\ its\ foreign\ operations\ as\ integral\ parts\ of\ the\ company,\
both\ strategically\ and\ organizationally.\ Companies\ that\ either\ do\ not\ hold\ equity\ positions\
or\ hold\ minor\ equity\ positions\ in\ overseas\ ventures\ without\ or\ with\ very\ low\ management
involvement\ may\ be\ viewed\ as\ “international”\ companies\ but\ would\ not\ be\ regarded\ as\
multinational\ enterprises.)
Difficulty:\Moderate\
Pg:\ 12
Subject:\ MNE\ definition
15. Three\ prerequisites\ that\ must\ be\ satisfied\ before\ a\ national\ firm\ can\ transform\ itself\ into\ a\
multinational\ firm\ include:
a. scale-based\ advantages,\ ownership-specific\ advantages,\ and\ contractual\ capabilities.
b. location-specific\ advantages,\ ownership-specific\ advantages,\ and\ organizational\ capabilities.
c. scale-based\ advantages,\ ownership-specific\ advantages,\ and\ organizational\ capabilities.
d. location-specific\ advantages,\ knowledge\ advantages,\ and\ organizational\ capabilities.
ANS:b\ (a,\ c,\ and\ d\ are\ incorrect\ since\ scale-based\ advantages,\ knowledge-based\ advantages,\
and\ contractual\ capabilities\ are,\ by\ themselves,\ insufficient\ to\ justify\ the\ internationalization\
of\ operations.\ With\ much\ less\ effort\ a\ company\ often\ can\ sell\ or\ license\ itstechnology\ to\
foreign\ producers,\ franchise\ its\ brand\ name\ internationally,\ or\ sell\ its\ products\ abroad\ through\
local\ distributors,\ without\ having\ to\ set\ up\ its\ own\ offshore\ operations.)\ Difficulty:\ Moderate\
to\ hard
Pg:\ 22
Subject:\ Prerequisites\ for\ internationalization
16. Which\ of\ the\ following\ correctly\ describes\ the\ sequential\ evolution\ in\ management\ thinking\
with\ respect\ to\ the\ strategic\ role\ of\ foreign\ operations\ in\ emerging\ MNEs?
a. global\ mentality,\ multinational\ mentality,\ international\ mentality,\ transnational\ mentality.
b. international\ mentality,\ global\ mentality,\ transnational\ mentality,\ multinational\ mentality.
c. multinational\ mentality,\ global\ mentality,\ international\ mentality,\ transnational\ mentality.
d. international\ mentality,\ multinational\ mentality,\ global\ mentality,\ transnational\ mentality.
ANS:d\ (a,\ b,\ and\ c\ are\ incorrect\ since,\ although\ they\ describe\ the\ different\ ways\ of\ management\
thinking\ regarding\ the\ strategic\ role\ of\ foreign\ operations\ in\ emerging\ MNEs,\ theydo\ not\
describe\ the\ evolution\ of\ this\ thinking\ in\ the\ correct\ sequence.)
4
Expanding abroad:
Motivations, means, and mentalities
True/False
1. The largest MNEs are equivalent in their economic importance\ to\ less\ developed\ economies\
such\ as\ Nigeria,\ Moldova,\ or\ Jamaica.
ANS:False\ (Sales\ of\ the\ largest\ MNEs\ exceed\ the\ GDPs\ of\ less\ developed\ countries.)\
Difficulty:\ Moderate
Pg:\ 16\ and\ Table\ 1.3\ (16)
Subject:\ MNE\ influence\ in\ the\ global\ economy
2. The\ process\ of\ internationalization\ followed\ by\ most\ firms\ is\ usually\ well-thought\ out\ in\
advance\ and\ typically\ builds\ on\ a\ combination\ of\ rational\ analysis,\ planning\ and\
implementation.
ANS:False\ (It\ is\ more\ likely\ a\ combination\ of\ rational\ analysis,\ opportunism,\ and\ luck.\ In\
regards\ to\ opportunism,\ several\ studies\ have\ found\ that\ most\ firms\ begin\ exporting\ due\ to\
an\ unsolicited\ export\ order.)
Difficulty:\Moderate\
Pg:\ 22-23
Subject:\ The\ Process\ of\ Internationalization
3. All\ companies\ internationalize\ in\ an\ incremental\ manner.\ First,\ they\ make\ an\ initial\
commitment\ of\ resources\ to\ the\ foreign\ market\ in\ order\ to\ secure\ local\ market\ knowledge.\
Building\ on\ this\ knowledge,\ they\ make\ subsequent\ resource\ commitments,\ eventually\
leading\ to\ higher\ levels\ of\ investment\ in\ the\ foreign\ market.
ANS:False\ (There\ are\ many\ exceptions\ to\ the\ incremental\ approach.\ Some\ firms\ are\ “born\
globals”.\ Other\ firms\ retain\ the\ same\ mode,\ including\ level\ of\ subsidiary\ involvement,\ in\ all\
foreign\ markets.)
Difficulty:\Moderate\
Pg:\ 23
Subject:\ The\ Process\ of\ Internationalization
4. A\ joint\ venture\ is\ a\ contractual\ mode\ of\ foreign\ entry\ involving\ a\ high\ level\ of\ resource\
commitment\ by\ all\ partners.
ANS:False\ (A\ JV\ will\ not\ typically\ require\ as\ high\ a\ resource\ commitment\ as\ we\ would\ see\ in\
wholly\ owned\ subsidiaries.\ In\ addition,\ there\ is\ significant\ variability\ in\ the\ level\ of\
resources\ contributed\ by\ partners.)
1
,Difficulty:\ Moderate\ Pg:
24\ (Figure\ 1.2)\ Subject:
Foreign\ entry\mode
5. Emerging\ motivations\ for\ internationalization\ include\ the\ desire\ to\ enhance\ the\ firm’s\
competitive\ position\ and\ the\ desire\ to\ develop\ global\ scanning\ capabilities.
ANS:True\
Difficulty:
ModeratePg:
19-20
Subject:\ Emerging\ Motivations
6. For\ an\ MNE\ to\ exist,\ first\ foreign\ countries\ must\ provide\ location-specific\ advantages\ to\
attract\ the\ company\ to\ invest\ there,\ second\ the\ company\ must\ have\ ownership-specific\
advantages\ that\ counteract\ its\ liability\ of\ foreignness,\ third\ the\ company\ must\ have\ the\
organizational\ capability\ to\ leverage\ its\ strategic\ advantages\ more\ effectively\ internally\than\
externally.
ANS:True\
Difficulty:\Moderate\
Pg:\ 22
Subject:\ Prerequisites\ for\ internationalization
7. An\ MNE\ with\ an\ ‘international\ mentality’\ will\ typically\ be\ managed\ as\ a\ coordinated\
federation.
ANS:True\
Difficulty:\Moderate\
Pg:\ 26
Subject:\ The\ evolving\ mentality:\ international\ to\ transnational
8. An\ MNE\ with\ a\ ‘multinational\ mentality’\ will\ typically\ be\ managed\ as\ a\ coordinated\
federation.
ANS:False\ (It\ will\ typically\ be\ managed\ as\ a\ decentralized\ federation.)Difficulty:\
Moderate
Pg:\ 26-27
Subject:\ The\ evolving\ mentality:\ international\ to\ transnational
9. An\ MNE\ with\ a\ ‘global\ mentality’\ will\ typically\ manage\ its\ operations\ centrally.
2
,ANS:True\
Difficulty:\Moderate\
Pg:\ 27
Subject:\ The\ evolving\ mentality:\ international\ to\ transnational
10. An\ MNE\ with\ a\ ‘transnational\ mentality’\ will\ typically\ be\ managed\ as\ an\ integrated\ network.
ANS:True\
Difficulty:\Moderate\
Pg:\ 27
Subject:\ The\ evolving\ mentality:\ international\ to\ transnational
11. The\ core\ advantage\ multinational\ mentality\ has\ over\ global\ mentality\ is\ more\ efficient\
manufacturing.
ANS:False\ (it\ is\ the\ other\ way\ around)Difficulty:
Moderate\
Pg:\ 26-27
Subject:\ The\ evolving\ mentality:\ international\ to\ transnational
12. Raymond\ Vernon’s\ article\ “Gone\ are\ the\ cash\ cows\ of\ yesteryear”\ highlights\ a\ company’s\
global\ scanning\ and\ learning\ capability.
ANS:True\
Difficulty:\Hard
Pg\ 19\ (footnote\ 10)
Subject:\ Emerging\ Motivations
13. Only\one\ article\ further\ develops\ the\ idea\ that\ “the\ process\ of\ developing\ these\ strategic\ and\
organizational\ attributes\ lies\ at\ the\ heart\ of\ the\ internationalization\ process\ through\ which\
a\ company\ builds\ its\ position\ in\ world\ markets.
ANS:False\ (2\ articles\ further\ develop\ the\ idea:\ A.\ Jonsson\ and\ N.\ J.\ Foss,\ “International\
expansion\ through\ flexible\ replication:\ learning\ from\ the\ internationalization\ experience\
of\ IKEA,”\ Journal\ of\ International\ Business\ Studies,\ 42:9\ (2011),
1079–1102\ and\ J.\ W.\ Lu\ and\ P.\ W.\ Beamish,\ “International\ diversification\ and\ firm\
performance:\ the\ S-curve\ hypothesis,”\ Academy\ of\ Management\ Journal,\ 47:4\ (2004),\ 598–609.)\
Difficulty:\ Hard
Pg:\ 22-23\ (footnote\ 15)
Subject:\ Process\ of\ Internationalization
3
, Multiple\ Choice
14. An\ MNE\ is\ a(n):
a. import-export\ company\ that\ actively\ trades\ in\ foreign\ markets.
b. company\that\ passively\ manages\ its\ substantial\ foreign\ direct\ investment.
c. import-export\ company\ that\ actively\ manages\ its\ foreign\ investment\ portfolio.
d. company\that\ actively\ manages\ substantial\ foreign\ direct\ investment.
ANS:d\ (A\ true\ MNE\ is\ a\ company\that\ has\ substantial\ direct\ investment\ in\ foreign\ countries,\
and\ that\ actively\ manages\ and\ regards\ its\ foreign\ operations\ as\ integral\ parts\ of\ the\ company,\
both\ strategically\ and\ organizationally.\ Companies\ that\ either\ do\ not\ hold\ equity\ positions\
or\ hold\ minor\ equity\ positions\ in\ overseas\ ventures\ without\ or\ with\ very\ low\ management
involvement\ may\ be\ viewed\ as\ “international”\ companies\ but\ would\ not\ be\ regarded\ as\
multinational\ enterprises.)
Difficulty:\Moderate\
Pg:\ 12
Subject:\ MNE\ definition
15. Three\ prerequisites\ that\ must\ be\ satisfied\ before\ a\ national\ firm\ can\ transform\ itself\ into\ a\
multinational\ firm\ include:
a. scale-based\ advantages,\ ownership-specific\ advantages,\ and\ contractual\ capabilities.
b. location-specific\ advantages,\ ownership-specific\ advantages,\ and\ organizational\ capabilities.
c. scale-based\ advantages,\ ownership-specific\ advantages,\ and\ organizational\ capabilities.
d. location-specific\ advantages,\ knowledge\ advantages,\ and\ organizational\ capabilities.
ANS:b\ (a,\ c,\ and\ d\ are\ incorrect\ since\ scale-based\ advantages,\ knowledge-based\ advantages,\
and\ contractual\ capabilities\ are,\ by\ themselves,\ insufficient\ to\ justify\ the\ internationalization\
of\ operations.\ With\ much\ less\ effort\ a\ company\ often\ can\ sell\ or\ license\ itstechnology\ to\
foreign\ producers,\ franchise\ its\ brand\ name\ internationally,\ or\ sell\ its\ products\ abroad\ through\
local\ distributors,\ without\ having\ to\ set\ up\ its\ own\ offshore\ operations.)\ Difficulty:\ Moderate\
to\ hard
Pg:\ 22
Subject:\ Prerequisites\ for\ internationalization
16. Which\ of\ the\ following\ correctly\ describes\ the\ sequential\ evolution\ in\ management\ thinking\
with\ respect\ to\ the\ strategic\ role\ of\ foreign\ operations\ in\ emerging\ MNEs?
a. global\ mentality,\ multinational\ mentality,\ international\ mentality,\ transnational\ mentality.
b. international\ mentality,\ global\ mentality,\ transnational\ mentality,\ multinational\ mentality.
c. multinational\ mentality,\ global\ mentality,\ international\ mentality,\ transnational\ mentality.
d. international\ mentality,\ multinational\ mentality,\ global\ mentality,\ transnational\ mentality.
ANS:d\ (a,\ b,\ and\ c\ are\ incorrect\ since,\ although\ they\ describe\ the\ different\ ways\ of\ management\
thinking\ regarding\ the\ strategic\ role\ of\ foreign\ operations\ in\ emerging\ MNEs,\ theydo\ not\
describe\ the\ evolution\ of\ this\ thinking\ in\ the\ correct\ sequence.)
4
