Chapter 11 - Multinational Corporations
Questions and Answers
Multinational corporation (MNC) - answer An entity headquartered in one country
that does business in one or more foreign countries.
Liberalization - answer The economic policy of lowering tariffs and other barriers to
encourage trade and investment.
Transnational corporation - answer As defined by the United Nations, a parent firm
that controls the assets of affiliated entities in foreign countries.
Foreign affiliates - answer Business entities in foreign countries controlled by parent
transnational corporations.
Transnationality Index (TI) - answer The average of three ratios: foreign assets to
total assets, foreign sales to total sales, and foreign employment to total employment.
Foreign Direct Investment (FDI) - answer Funds invested by a parent MNC for
starting, acquiring, or expanding an affiliate in a foreign nation.
Portfolio investment - answer The limited, speculative purchase of stocks and bonds
in a foreign company by individuals or equity funds.
Sovereign wealth funds - answer A government entity that invests the savings of a
nation. Since it is state-owned, its investment goals may be different from those of
private equity funds.
International codes of conduct - answer Voluntary, aspirational statements by MNCs
that set forth standards for foreign operations.
Sullivan principles - answer A 1977 code of conduct that required multinational
corporations in South Africa to do business in a nondiscriminatory way.
Soft law - answer Statements of philosophy, policy, and principle found in nonbinding
international agreements that, over time, gain legitimacy as guidelines for interpreting
the "hard law" in legally binding agreements.
OECD Guidelines for Multinational Enterprises - answer "Recommendations" from
OECD governments to multinational corporations that operate within or from their
borders.
Questions and Answers
Multinational corporation (MNC) - answer An entity headquartered in one country
that does business in one or more foreign countries.
Liberalization - answer The economic policy of lowering tariffs and other barriers to
encourage trade and investment.
Transnational corporation - answer As defined by the United Nations, a parent firm
that controls the assets of affiliated entities in foreign countries.
Foreign affiliates - answer Business entities in foreign countries controlled by parent
transnational corporations.
Transnationality Index (TI) - answer The average of three ratios: foreign assets to
total assets, foreign sales to total sales, and foreign employment to total employment.
Foreign Direct Investment (FDI) - answer Funds invested by a parent MNC for
starting, acquiring, or expanding an affiliate in a foreign nation.
Portfolio investment - answer The limited, speculative purchase of stocks and bonds
in a foreign company by individuals or equity funds.
Sovereign wealth funds - answer A government entity that invests the savings of a
nation. Since it is state-owned, its investment goals may be different from those of
private equity funds.
International codes of conduct - answer Voluntary, aspirational statements by MNCs
that set forth standards for foreign operations.
Sullivan principles - answer A 1977 code of conduct that required multinational
corporations in South Africa to do business in a nondiscriminatory way.
Soft law - answer Statements of philosophy, policy, and principle found in nonbinding
international agreements that, over time, gain legitimacy as guidelines for interpreting
the "hard law" in legally binding agreements.
OECD Guidelines for Multinational Enterprises - answer "Recommendations" from
OECD governments to multinational corporations that operate within or from their
borders.
