Global Business Chapter 6- Exam Questions and Correct Answers (Already Passed)
Foreign portfolio investment (FPI) - Answers Investment in a portfolio of foreign securities such as stocks
and bonds
Management control right - Answers The right to appoint key managers and establish control
mechanisms
Horizontal FDI - Answers A type of FDI in which a firm duplicates its home country-based activities at the
same value chain stage in a host country
Vertical FDI - Answers A type of FDI in which a firm moves upstream or downstream at different value
chain stages in a host country
Upstream vertical FDI - Answers A type of vertical FDI in which a firm engages in an upstream stage of
the value chain in a host country
Downstream vertical FDI - Answers A type of vertical FDI in which a firm engages in a downstream stage
of the value chain in a host country
FDI flow - Answers The amount of FDI moving in a given period (usually a year) in a certain direction
FDI inflow - Answers Inbound FDI moving into a country in a year
FDI outflow - Answers Outbound FDI moving out of a country in a year
FDI stock - Answers Total accumulation of inbound FDI in a country or outbound FDI from a country
across a given period (usually several years)
OLI advantage - Answers A firm's quest for ownership (O) advantages, location (L), advantages, and
internalization (I) advantages via FDI
Ownership - Answers An MNE's possession and leveraging of certain valueable, rare, hard-to-imitate,
and organizationally embedded (VRIO) assets overseas in the context of FDI
Location - Answers Advantages enjoyed by firms operating in a certain location
Internalization - Answers The replacement of cross-border markets (such as exporting and importing)
with one firm (the MNE) locating and operating in two or more countries
Licensing - Answers Firm A's agreement to give Firm B the rights to use A's proprietary technology (such
as a patent) or trademark (such as a corporate logo) for a royalty fee paid to A by B. This is typically done
in manufacturing industries
Market imperfection (market failure) - Answers The imperfect rules governing international transactions
Dissemination risk - Answers Risk associated with unauthorized diffusion of firm-specific know-how
Foreign portfolio investment (FPI) - Answers Investment in a portfolio of foreign securities such as stocks
and bonds
Management control right - Answers The right to appoint key managers and establish control
mechanisms
Horizontal FDI - Answers A type of FDI in which a firm duplicates its home country-based activities at the
same value chain stage in a host country
Vertical FDI - Answers A type of FDI in which a firm moves upstream or downstream at different value
chain stages in a host country
Upstream vertical FDI - Answers A type of vertical FDI in which a firm engages in an upstream stage of
the value chain in a host country
Downstream vertical FDI - Answers A type of vertical FDI in which a firm engages in a downstream stage
of the value chain in a host country
FDI flow - Answers The amount of FDI moving in a given period (usually a year) in a certain direction
FDI inflow - Answers Inbound FDI moving into a country in a year
FDI outflow - Answers Outbound FDI moving out of a country in a year
FDI stock - Answers Total accumulation of inbound FDI in a country or outbound FDI from a country
across a given period (usually several years)
OLI advantage - Answers A firm's quest for ownership (O) advantages, location (L), advantages, and
internalization (I) advantages via FDI
Ownership - Answers An MNE's possession and leveraging of certain valueable, rare, hard-to-imitate,
and organizationally embedded (VRIO) assets overseas in the context of FDI
Location - Answers Advantages enjoyed by firms operating in a certain location
Internalization - Answers The replacement of cross-border markets (such as exporting and importing)
with one firm (the MNE) locating and operating in two or more countries
Licensing - Answers Firm A's agreement to give Firm B the rights to use A's proprietary technology (such
as a patent) or trademark (such as a corporate logo) for a royalty fee paid to A by B. This is typically done
in manufacturing industries
Market imperfection (market failure) - Answers The imperfect rules governing international transactions
Dissemination risk - Answers Risk associated with unauthorized diffusion of firm-specific know-how
