Exercise 1

A) Multiple choice questions (only one correct answer exists).

Q1: What is FDI? (p. 278) (b) Existing businesses are purchased or new facilities are built.

Q2: The purpose of a portfolio investment is to... (p. 278) (c) obtain a financial return on investment.

Q3: According to neoclassical economists, a firm’s behaviour is determined by… (p. 279) (d) market forces.

Q4: From the perspective of neoclassical economists, trade and investment are … (p. 280) a) perfect substitutes.

Q5: According to Gilpin, MNCs are primarily … firms. (p. 280) (b) oligopolistic.

Q6: The economist Paul Krugman is convinced that MNCs are not merely … for trade; in fact these corporations attempt to expand their … over foreign economies. (p. 281) (c) substitutes, control

Q7: What is the correct order of stages in Vernon’s product cycle theory? (p. 282) (d) innovation, growth, maturity, decline

Q8: Which of the following factors has been emphasised in Dunning’s theory? (p. 283) (b) technology

Q9: What advantages do MNCs have according to Dunning? (p. 284) (b) ownership, location and internalisation

Q10: Which of the following concepts was developed by Porter? (p. 285) (c) value chain

Q11: According to the state-centric approach, under what circumstances could the rise and success of MNCs have been realised? (p. 288) (a) favourable international political environment

Q12: According to the state-centric approach, what would happen if the major capitalist powers were to break down? (p. 288) (a) the dominant role of MNCs would diminish

B) Please decide whether the following statements are correct or not.

Q1: Multinational companies are amongst the key features of the globalisation of the world economy. C

Q2: MNCs expand overseas primarily through banking loans and portfolio investments such as the purchase of governments bonds. I

Q3: Generally speaking, the purpose of FDI is to achieve a partial or total control over marketing, production and other facilities in a foreign country. C

Q4: MNCs usually pursue a national strategy. I

Q5: According to neoclassical economists, the nationality of an MNC strongly determines its strategy and operation. I

Q6: MNCs are mostly the product of market imperfections and unique corporate experiences. C

Q7: Tax breaks are often applied by national governments in order to attract foreign direct investment. C

Q8: MNCs are acknowledged as a means to reduce transaction costs. C

Q9: For Vernon, FDI is a means used by corporations to pre-empt foreign competition and to maintain monopoly rents. C

Q10: According to Porter, the real disadvantage of multinational companies over domestic ones is that MNCs cannot “tap into the value chain”. I

topic 10.

Multinational corporations

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