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 Cameroon, Paraguay, or Barbados.
Answer: False (Sales of the largest MNEs exceed the GDPs of less developed countries.)
Difficulty: Easy
Page: 4 and Table 1-3 on page 6; ppt slide 1-6
Topic: 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.
Answer: 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
Page: 10-11
Topic: 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.
Answer: 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
Page: 11-12; ppt slides 1-13 to 1-15
Topic: 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.
,Answer: 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.)
Difficulty: Moderate
Page: 12 and Fig 1-2; ppt slides 1-16, 1-17
Topic: The process of internationalization
5. Emerging motivations for internationalization include the desire to enhance the firm’s
competitive position and the desire to develop global scanning capabilities.
Answer: True
Difficulty: Easy
Page: 8-9; ppt slides 1-9, 1-10
Topic: 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.
Answer: True
Difficulty: Moderate
Page: 10; ppt slides 1-11, 1-12
Topic: Prerequisites for internationalization
, 7. An MNE with an ‘international mentality’ will typically be managed as a coordinated
federation.
Answer: True
Difficulty: Moderate
Page: 13; ppt slides 1-18, 1-19
Topic: The evolving mentality: international to transnational
8. An MNE with a ‘multinational mentality’ will typically be managed as a coordinated
federation.
Expanding Abroad: Motivations, Means, and Mentalities
True/False
1. The largest MNEs are equivalent in their economic importance to less developed
economies such as Cameroon, Paraguay, or Barbados.
Answer: False (Sales of the largest MNEs exceed the GDPs of less developed countries.)
Difficulty: Easy
Page: 4 and Table 1-3 on page 6; ppt slide 1-6
Topic: 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.
Answer: 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
Page: 10-11
Topic: 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.
Answer: 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
Page: 11-12; ppt slides 1-13 to 1-15
Topic: 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.
,Answer: 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.)
Difficulty: Moderate
Page: 12 and Fig 1-2; ppt slides 1-16, 1-17
Topic: The process of internationalization
5. Emerging motivations for internationalization include the desire to enhance the firm’s
competitive position and the desire to develop global scanning capabilities.
Answer: True
Difficulty: Easy
Page: 8-9; ppt slides 1-9, 1-10
Topic: 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.
Answer: True
Difficulty: Moderate
Page: 10; ppt slides 1-11, 1-12
Topic: Prerequisites for internationalization
, 7. An MNE with an ‘international mentality’ will typically be managed as a coordinated
federation.
Answer: True
Difficulty: Moderate
Page: 13; ppt slides 1-18, 1-19
Topic: The evolving mentality: international to transnational
8. An MNE with a ‘multinational mentality’ will typically be managed as a coordinated
federation.
