Multinationals & EU – Compact Exam Handbook
MULTINATIONALS
AND THE EUROPEAN UNION
COMPACT EXAM HANDBOOK
KU Leuven – Faculty of Economics and Business
Prof. Annabel Sels & Prof. Arjen Slangen
Crash Course · Compact Textbook · Exam Survival Guide
Rania El Ghalbzouri Page 1
MBA Bridging Programme
, Multinationals & EU – Compact Exam Handbook
Chapter 1: Globalizing Business
1. Core Logic
International business studies how firms operate across borders. The course uses two complementary
lenses: the institution-based view (external rules of the game – formal and informal) and the resource-
based view (internal firm-specific resources and capabilities). Every topic connects back to this dual
framework. Firms that succeed abroad possess resources strong enough to overcome the liability of
foreignness/outsidership – the inherent disadvantage of operating in unfamiliar environments.
The fundamental question of the course: What determines the success and failure of firms around the
globe? The answer requires understanding both external constraints (institutions) and internal strengths
(resources). Neither perspective alone is sufficient.
2. Key Definitions
🟪 MOCK EXAM SIGNAL
This topic appeared in the sample exam (Q1: MNE definition). Know: all MNEs do IB, but not all IB firms are
MNEs.
Exam strategy: MNE requires FDI (= managerial control), not just cross-border trade. Statement (d) 'All
internationally-active firms are MNEs' is WRONG.
Term Definition Key Distinction
International Business (IB) Cross-border economic activities, or Covers both the international
the action of doing business abroad environment (I) and business
operations (B)
Global Business Business around the globe, including Broader than IB – includes domestic
domestic activities affected by firms impacted by globalization
international forces
MNE Firm that engages in FDI and Requires FDI and managerial
operates value-added activities in 2+ control, not just exports or licensing
countries
FDI Investment in controlling and Distinguished from portfolio
managing value-added activities in investment (FPI) by element of
other countries managerial control
Foreign Portfolio Investment (FPI) Investing in foreign securities No managerial control – purely
(stocks, bonds) for financial return financial. FDI ≠ FPI is a key exam
only distinction
Economic Indicators
Indicator What It Measures Key Feature
GDP Total market value of all final Location-based: includes output by
goods/services produced within a foreign firms in the country (e.g.,
country Toyota in UK = UK GDP)
GNP / GNI GDP + income from nonresident Nationality-based: captures output
sources abroad by a country's citizens regardless of
location
PPP Adjustment to GDP reflecting cost- Allows meaningful cross-country
of-living differences between comparisons. €1 buys more in
countries Nairobi than Oslo
Rania El Ghalbzouri Page 2
MBA Bridging Programme
, Multinationals & EU – Compact Exam Handbook
TNI (UNCTAD) Mean of: foreign assets/total, Measures how internationally
foreign sales/total, foreign dispersed a company is. Higher =
employment/total more global
3. Opening Case: Adidas
Adidas is a German MNE illustrating core course themes. Key facts: largest sales region is Asia Pacific (33%),
followed by Europe (26.8%) and North America (24%). Production: Vietnam (42% of footwear), Indonesia
(29%), China (15%). Over 500 primary suppliers, 61% as partners for 10+ years. The case demonstrates:
global supply chain management, balancing efficiency with local adaptation, stakeholder engagement
(labour standards, sustainability), and vulnerability to global shocks (Covid-19 caused 14% sales drop in
2020, supply chain bottlenecks in 2021, pivot to e-commerce).
4. European and Global Context
The course takes a European perspective. European domestic markets are smaller than USA/China, making
IB essential for almost all firms including SMEs. Most European businesses conduct the majority of
international activities within the EU – e.g., Czech Republic and Slovakia sell 83%+ of exports within the EU.
The course also covers emerging economies – economies with recent institutional frameworks for
international trade, typically low-middle income with above-average growth. About 85% of world
population lives in emerging markets, yet they produce only ~30% of global GDP. China rose from 4 firms
in the Fortune Global 500 (1995) to 134 (2021).
Emerging Economies
Economies that only recently established institutional frameworks facilitating international trade and
investment, typically with low- or middle-level incomes and above-average economic growth. Examples:
China, India, Brazil, Turkey, Central and Eastern European economies.
5. The Unified Framework
Institution-Based View
The success and failure of firms are enabled and constrained by formal and informal rules of the game
(institutions). Formal rules (laws, regulations, political systems) are explored in Ch2. Informal rules (culture,
norms, values) are explored in Ch3. Two core propositions: (1) managers and firms pursue their interests
rationally within given institutional constraints; (2) when formal constraints are unclear or fail, informal
constraints play a larger role in reducing uncertainty.
Resource-Based View
Even in harsh environments, a few firms thrive because they possess unique, valuable resources that
competitors lack. Foreign firms face the liability of foreignness (outsidership) – the disadvantage arising
from distant origins, lack of local experience, and lack of nearby experience. This creates a lack of
familiarity, networks, and legitimacy. Successful foreign firms possess overwhelming resources that, after
offsetting the liability, still yield competitive advantage.
Liability of Foreignness / Outsidership
Rania El Ghalbzouri Page 3
MBA Bridging Programme
, Multinationals & EU – Compact Exam Handbook
The inherent disadvantage outsiders experience in a new environment due to lack of familiarity with local
contexts, networks, and legitimacy. Three sources: (1) distant origins, (2) lack of local experience, (3) lack of
nearby experience. Companies like Coca-Cola and Microsoft overcome this through firm-specific resources.
6. Three Views on Globalization
View Author Argument Evidence
World is Flat Friedman (2005) Globalization is advanced Trade liberalization, digital
and inevitable; technology communication, fall of
creates level playing field political barriers
World is Spiky Florida (2005) Activity concentrates in Innovation, VC, talent
metropolitan 'spikes', not cluster in few peaks (NY,
spread evenly London, Shanghai, Tokyo)
Semi-Globalization Ghemawat (2007) Globalization is partial and Cross-border flows
limited; the '10% rule' typically represent only
10-25% of totals
(immigration, calls, FDI,
web traffic)
Globalization moves in waves driven by technology (advances) and politics (setbacks). The 19th-century
wave peaked ~1913 (FDI/GDP = 9%), collapsed with World Wars and protectionism, and the current wave
accelerated from the 1990s (world output grew 23%, trade expanded 80%, FDI flow increased fivefold in
the 1990s). Since ~2008, a 'slowbalization' debate has emerged.
Factors Discouraging Globalization
The professor identifies at least seven forces: (1) Brexit – protectionism within what was the world's largest
single market; (2) Trump-era protectionism and trade wars (US-China tariffs); (3) Covid-19 – exposed supply
chain fragility, drove reshoring debate; (4) Russia-Ukraine war – sanctions, energy decoupling, geopolitical
fragmentation; (5) US-China decoupling – technology restrictions, 'friendshoring'; (6) Climate-driven
reshoring – carbon border adjustment mechanisms; (7) Rising economic nationalism globally.
7. The Global Economic Pyramid
At the top: wealthy consumers in developed economies. At the base of the pyramid (BoP): ~4 billion people
earning less than €1,500/year. C.K. Prahalad argued MNEs can serve the poorest profitably while
addressing poverty – requiring fundamentally rethought products, pricing, distribution, and business
models.
8. Exam Focus
⚠ EXAM FOCUS
Know: MNE definition requires FDI (managerial control) – not all internationally-active firms are MNEs.
FDI vs FPI: FDI = control; FPI = financial return only. This distinction is frequently tested.
Three views on globalization: Flat (Friedman), Spiky (Florida), Semi-globalized (Ghemawat's 10% rule).
Unified framework: institution-based view + resource-based view → explains firm performance abroad.
Liability of foreignness/outsidership: three sources (distant origins, lack of local experience, lack of nearby
experience).
GDP vs GNI: GDP = where production happens; GNI = who produces it (nationality-based).
Globalization moves in waves. Current wave since 1990s; 'slowbalization' since ~2008.
Rania El Ghalbzouri Page 4
MBA Bridging Programme
MULTINATIONALS
AND THE EUROPEAN UNION
COMPACT EXAM HANDBOOK
KU Leuven – Faculty of Economics and Business
Prof. Annabel Sels & Prof. Arjen Slangen
Crash Course · Compact Textbook · Exam Survival Guide
Rania El Ghalbzouri Page 1
MBA Bridging Programme
, Multinationals & EU – Compact Exam Handbook
Chapter 1: Globalizing Business
1. Core Logic
International business studies how firms operate across borders. The course uses two complementary
lenses: the institution-based view (external rules of the game – formal and informal) and the resource-
based view (internal firm-specific resources and capabilities). Every topic connects back to this dual
framework. Firms that succeed abroad possess resources strong enough to overcome the liability of
foreignness/outsidership – the inherent disadvantage of operating in unfamiliar environments.
The fundamental question of the course: What determines the success and failure of firms around the
globe? The answer requires understanding both external constraints (institutions) and internal strengths
(resources). Neither perspective alone is sufficient.
2. Key Definitions
🟪 MOCK EXAM SIGNAL
This topic appeared in the sample exam (Q1: MNE definition). Know: all MNEs do IB, but not all IB firms are
MNEs.
Exam strategy: MNE requires FDI (= managerial control), not just cross-border trade. Statement (d) 'All
internationally-active firms are MNEs' is WRONG.
Term Definition Key Distinction
International Business (IB) Cross-border economic activities, or Covers both the international
the action of doing business abroad environment (I) and business
operations (B)
Global Business Business around the globe, including Broader than IB – includes domestic
domestic activities affected by firms impacted by globalization
international forces
MNE Firm that engages in FDI and Requires FDI and managerial
operates value-added activities in 2+ control, not just exports or licensing
countries
FDI Investment in controlling and Distinguished from portfolio
managing value-added activities in investment (FPI) by element of
other countries managerial control
Foreign Portfolio Investment (FPI) Investing in foreign securities No managerial control – purely
(stocks, bonds) for financial return financial. FDI ≠ FPI is a key exam
only distinction
Economic Indicators
Indicator What It Measures Key Feature
GDP Total market value of all final Location-based: includes output by
goods/services produced within a foreign firms in the country (e.g.,
country Toyota in UK = UK GDP)
GNP / GNI GDP + income from nonresident Nationality-based: captures output
sources abroad by a country's citizens regardless of
location
PPP Adjustment to GDP reflecting cost- Allows meaningful cross-country
of-living differences between comparisons. €1 buys more in
countries Nairobi than Oslo
Rania El Ghalbzouri Page 2
MBA Bridging Programme
, Multinationals & EU – Compact Exam Handbook
TNI (UNCTAD) Mean of: foreign assets/total, Measures how internationally
foreign sales/total, foreign dispersed a company is. Higher =
employment/total more global
3. Opening Case: Adidas
Adidas is a German MNE illustrating core course themes. Key facts: largest sales region is Asia Pacific (33%),
followed by Europe (26.8%) and North America (24%). Production: Vietnam (42% of footwear), Indonesia
(29%), China (15%). Over 500 primary suppliers, 61% as partners for 10+ years. The case demonstrates:
global supply chain management, balancing efficiency with local adaptation, stakeholder engagement
(labour standards, sustainability), and vulnerability to global shocks (Covid-19 caused 14% sales drop in
2020, supply chain bottlenecks in 2021, pivot to e-commerce).
4. European and Global Context
The course takes a European perspective. European domestic markets are smaller than USA/China, making
IB essential for almost all firms including SMEs. Most European businesses conduct the majority of
international activities within the EU – e.g., Czech Republic and Slovakia sell 83%+ of exports within the EU.
The course also covers emerging economies – economies with recent institutional frameworks for
international trade, typically low-middle income with above-average growth. About 85% of world
population lives in emerging markets, yet they produce only ~30% of global GDP. China rose from 4 firms
in the Fortune Global 500 (1995) to 134 (2021).
Emerging Economies
Economies that only recently established institutional frameworks facilitating international trade and
investment, typically with low- or middle-level incomes and above-average economic growth. Examples:
China, India, Brazil, Turkey, Central and Eastern European economies.
5. The Unified Framework
Institution-Based View
The success and failure of firms are enabled and constrained by formal and informal rules of the game
(institutions). Formal rules (laws, regulations, political systems) are explored in Ch2. Informal rules (culture,
norms, values) are explored in Ch3. Two core propositions: (1) managers and firms pursue their interests
rationally within given institutional constraints; (2) when formal constraints are unclear or fail, informal
constraints play a larger role in reducing uncertainty.
Resource-Based View
Even in harsh environments, a few firms thrive because they possess unique, valuable resources that
competitors lack. Foreign firms face the liability of foreignness (outsidership) – the disadvantage arising
from distant origins, lack of local experience, and lack of nearby experience. This creates a lack of
familiarity, networks, and legitimacy. Successful foreign firms possess overwhelming resources that, after
offsetting the liability, still yield competitive advantage.
Liability of Foreignness / Outsidership
Rania El Ghalbzouri Page 3
MBA Bridging Programme
, Multinationals & EU – Compact Exam Handbook
The inherent disadvantage outsiders experience in a new environment due to lack of familiarity with local
contexts, networks, and legitimacy. Three sources: (1) distant origins, (2) lack of local experience, (3) lack of
nearby experience. Companies like Coca-Cola and Microsoft overcome this through firm-specific resources.
6. Three Views on Globalization
View Author Argument Evidence
World is Flat Friedman (2005) Globalization is advanced Trade liberalization, digital
and inevitable; technology communication, fall of
creates level playing field political barriers
World is Spiky Florida (2005) Activity concentrates in Innovation, VC, talent
metropolitan 'spikes', not cluster in few peaks (NY,
spread evenly London, Shanghai, Tokyo)
Semi-Globalization Ghemawat (2007) Globalization is partial and Cross-border flows
limited; the '10% rule' typically represent only
10-25% of totals
(immigration, calls, FDI,
web traffic)
Globalization moves in waves driven by technology (advances) and politics (setbacks). The 19th-century
wave peaked ~1913 (FDI/GDP = 9%), collapsed with World Wars and protectionism, and the current wave
accelerated from the 1990s (world output grew 23%, trade expanded 80%, FDI flow increased fivefold in
the 1990s). Since ~2008, a 'slowbalization' debate has emerged.
Factors Discouraging Globalization
The professor identifies at least seven forces: (1) Brexit – protectionism within what was the world's largest
single market; (2) Trump-era protectionism and trade wars (US-China tariffs); (3) Covid-19 – exposed supply
chain fragility, drove reshoring debate; (4) Russia-Ukraine war – sanctions, energy decoupling, geopolitical
fragmentation; (5) US-China decoupling – technology restrictions, 'friendshoring'; (6) Climate-driven
reshoring – carbon border adjustment mechanisms; (7) Rising economic nationalism globally.
7. The Global Economic Pyramid
At the top: wealthy consumers in developed economies. At the base of the pyramid (BoP): ~4 billion people
earning less than €1,500/year. C.K. Prahalad argued MNEs can serve the poorest profitably while
addressing poverty – requiring fundamentally rethought products, pricing, distribution, and business
models.
8. Exam Focus
⚠ EXAM FOCUS
Know: MNE definition requires FDI (managerial control) – not all internationally-active firms are MNEs.
FDI vs FPI: FDI = control; FPI = financial return only. This distinction is frequently tested.
Three views on globalization: Flat (Friedman), Spiky (Florida), Semi-globalized (Ghemawat's 10% rule).
Unified framework: institution-based view + resource-based view → explains firm performance abroad.
Liability of foreignness/outsidership: three sources (distant origins, lack of local experience, lack of nearby
experience).
GDP vs GNI: GDP = where production happens; GNI = who produces it (nationality-based).
Globalization moves in waves. Current wave since 1990s; 'slowbalization' since ~2008.
Rania El Ghalbzouri Page 4
MBA Bridging Programme
