Updated/Latest 2025–2026 Global Business Test Bank Comprehensive Exam Questions Answers And Rationales Study Guide For International Business Management Global Trade Marketing Economics Business Strategy Academic Excellence And Professional Success.

Chapter 1
Expanding abroad:
Motivations, means, and mentalities

True/False

1. The larges MNEs are equivalen in their economic importance to less developed economies
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such as Nigeria, Moldova, or Jamaica.
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ANS:False (Sales of the largest MNEs exceed the GDPs of less developed countries.) Difficulty:
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Moderate
Pg: 16 and Table 1.3 (16)
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Subject: MNE influence in the global economy
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2. The process of internationalization followed by most firms is usually well-thought out in
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advance and typically builds on a combination of rational analysis, planning and
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implementation.

ANS:False (It is more likely a combination of rational analysis, opportunism, and luck. In
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regards to opportunism, several studies have found that most firms begin exporting due to an
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unsolicited export order.) J J



Difficulty: Moderate J J



Pg: 22-23
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Subject: The Process of Internationalization
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3. All companies internationalize in an incremental manner. First, they make an initial
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commitment of resources to the foreign market in order to secure local market knowledge.
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Building on this knowledge, they make subsequent resource commitments, eventually
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leading to higher levels of investment in the foreign market.
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ANS:False (There are many exceptions to the incremental approach. Some firms are “born
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globals”. Other firms retain the same mode, including level of subsidiary involvement, in all
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foreign markets.)
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Difficulty: Moderate J J



Pg: 23
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Subject: The Process of Internationalization
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4. A joint venture is a contractual mode of foreign entry involving a high level of resource
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commitment by all partners. J J J




ANS:False (A JV will not typically require as high a resource commitment as we would see in
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wholly owned subsidiaries. In addition, there is significant variability in the level of resources
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contributed by partners.) J J




1

,Difficulty: Moderate Pg: J J



24 (Figure 1.2) Subject:
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Foreign entrymode J J




5. Emerging motivations for internationalization include the desire to enhance the firm’s
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competitive position and the desire to develop global scanning capabilities.
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ANS:True J



Difficulty:
ModeratePg:
19-20
Subject: Emerging Motivations
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6. For an MNE to exist, first foreign countries must provide location-specific advantages to
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attract the company to invest there, second the company must have ownership-specific
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advantages that counteract its liability of foreignness, third the company must have the
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organizational capability to leverage its strategic advantages more effectively internallythan
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externally.

ANS:True J



Difficulty: Moderate J J



Pg: 22J



Subject: Prerequisites for internationalization
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7. An MNE with an ‘international mentality’ will typically be managed as a coordinated
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federation.

ANS:True J



Difficulty: Moderate J J



Pg: 26J



Subject: The evolving mentality: international to transnational
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8. An MNE with a ‘multinational mentality’ will typically be managed as a coordinated
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federation.

ANS:False (It will typically be managed as a decentralized federation.)Difficulty: Moderate
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Pg: 26-27
J



Subject: The evolving mentality: international to transnational
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9. An MNE with a ‘global mentality’ will typically manage its operations centrally.
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2

,ANS:True J



Difficulty: Moderate J J



Pg: 27 J



Subject: The evolving mentality: international to transnational
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10. An MNE with a ‘transnational mentality’ will typically be managed as an integrated network.
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ANS:True J



Difficulty: Moderate J J



Pg: 27 J



Subject: The evolving mentality: international to transnational
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11. The core advantage multinational mentality has over global mentality is more efficient
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manufacturing.

ANS:False (it is the other way around)Difficulty:
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Moderate J



Pg: 26-27 J



Subject: The evolving mentality: international to transnational
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12. Raymond Vernon’s article “Gone are the cash cows of yesteryear” highlights a company’s
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global scanning and learning capability.
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ANS:True J



Difficulty: Hard J



Pg 19 (footnote 10)
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Subject: Emerging Motivations
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13. Only one article further develops the idea that “the process of developing these strategic and
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organizational attributes lies at the heart of the internationalization process through which a
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company builds its position in world markets. J J J J J J




ANS:False (2 articles further develop the idea: A. Jonsson and N. J. Foss, “International
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expansion through flexible replication: learning from the internationalization experience of
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IKEA,” Journal of International Business Studies, 42:9 (2011),
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1079–1102 and J. W. Lu and P. W. Beamish, “International diversification and firm performance:
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the S-curve hypothesis,” Academy of Management Journal, 47:4 (2004), 598–609.) Difficulty: Hard
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Pg: 22-23 (footnote 15)
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Subject: Process of Internationalization
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3

, Multiple Choice J




14. An MNE is a(n):J J J



a. import-export company that actively trades in foreign markets. J J J J J J J



b. company that passively manages its substantial foreign direct investment.
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c. import-export company that actively manages its foreign investment portfolio. J J J J J J J J



d. companythat actively manages substantial foreign direct investment.
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ANS:d (A true MNE is a company that has substantial direct investment in foreign countries, and
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that actively manages and regards its foreign operations as integral parts of the company, both
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strategically and organizationally. Companies that either do not hold equity positions or hold
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minor equity positions in overseas ventures without or with very low management
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involvement may be viewed as “international” companies but would not be regarded as
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multinational enterprises.) J



Difficulty: Moderate J J



Pg: 12 J



Subject: MNE definitionJ J




15. Three prerequisites that must be satisfied before a national firm can transform itself into a
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multinational firm include: J J



a. scale-based advantages, ownership-specific advantages, and contractual capabilities.
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b. location-specific advantages, ownership-specific advantages, and organizational capabilities. J J J J J J



c. scale-based advantages, ownership-specific advantages, and organizational capabilities.
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d. location-specific advantages, knowledge advantages, and organizational capabilities. J J J J J J




ANS:b (a, c, and d are incorrect since scale-based advantages, knowledge-based advantages,
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and contractual capabilities are, by themselves, insufficient to justify the internationalization of
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operations. With much less effort a company often can sell or license itstechnology to foreign
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producers, franchise its brand name internationally, or sell its products abroad through local
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distributors, without having to set up its own offshore operations.) Difficulty: Moderate to hard
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Pg: 22 J



Subject: Prerequisites for internationalization
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16. Which of the following correctly describes the sequential evolution in management thinking
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with respect to the strategic role of foreign operations in emerging MNEs?
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a. global mentality, multinational mentality, international mentality, transnational mentality.
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b. international mentality, global mentality, transnational mentality, multinational mentality.
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c. multinational mentality, global mentality, international mentality, transnational mentality.
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d. international mentality, multinational mentality, global mentality, transnational mentality.
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ANS:d (a, b, and c are incorrect since, although they describe the different ways of management
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thinking regarding the strategic role of foreign operations in emerging MNEs, theydo not describe
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the evolution of this thinking in the correct sequence.)
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