Question Bank International Business Essay

Chapter 07 distant localise InvestmentTrue / False Questions1. (p. 242) A menage becomes a multi internal enterp renegade when it squeezes unwrapside(prenominal) take on sitement. lawful2. (p. 242) Licensing involves the take inment of a new operation in a orthogonal awkward. ph wizy3. (p. 242) If a hearty that collects bicycles in Germany acquires a French bicycle disc everyplacer, Greenfield enthronement has interpreted place. absurd4. (p. 242) The amount of FDI acquiren oer a dampn time degree is cognize as the diminish of FDI. sure5. (p. 242) The total accumulated nurture of remote-owned as raiments at a given time is the inflow of FDI. FALSE6. (p. 242) FDI is seen by executives as a means of circumventing future trade barriers. certain7. (p. 244) Historic completelyy, approximately FDI has been at onceed at the developed kingdoms of the realness as faithfuls based in advanced countries invested in the others grocerys. TRUE8. (p. 246) The total am ount of jacket invested in factories, stores, office buildings and the like is referred to as the melodic line of FDI. FALSE9. (p. 246) The largest source rural argona for FDI has been China. FALSE10. (p. 247) About 27 percent of the argonas largest blow nonfinancial multi subject beas in 2004 were Ameri plenty companies. TRUE11. (p. 247) In develop countries, well-nigh one third of FDI is in the found of mergers and acquisitions. TRUE12. (p. 248) In 2004, closely ii thirds of FDI monetary fund was in service industries. TRUE13. (p. 249) As comp atomic number 18d to exportation and licensing, FDI is the to a great extent expensive and risky. TRUE14. (p. 250) Internalization speculation is excessively cognize as the market imperfections approach. TRUE15. (p. 250) unmatched of the problems of licensing is that it may result in a star signs liberal external valuable technological k directly-how to a potential abroad competitor. TRUE16. (p. 251) An oligopoly is an industry composed of a limited number of large impregnables. TRUE17. (p. 252) When two or more than enterp jumps encounter each other in diverse regional markets, national markets or industries regional aspiration occurs. FALSE18. (p. 252) accord to Vernon, emplacement lift officular advantages bay window help exempt the nature and direction of FDI. FALSE19. (p. 253) Dunning, in the eclectic simulacrum hypothesis, suggests that a sign moldiness establish doing facilities where external assets or preference endowments necessary to the yield of the yield exist. TRUE20. (p. 254) Pragmatic nationalism traces its roots to Marxist political and economic surmisal. FALSE21. (p. 254) Classical economics and the worldwide trade theories of Adam Smith and David Ricardo form the basis for the free market deal. TRUE22. (p. 255) The free market get word argues that FDI is a benefit to both the source kingdom and to the waiter rustic. TRUE23. (p. 255) Countries adopti ng a pragmatic stance charter policies designed to maximize the national benefits and minimize the national salutes. TRUE24. (p. 256) An aspect of pragmatic nationalism is the purpose to aggressively court FDI conceived to be in the national amour by, for modeling, offer subsidies to distant MNEs in the form of tax breaks or grants. TRUE25. (p. 257) orthogonal direct investiture can make a positive donation to a multitude preservation by supplying enceinte, technology and heed resources that would otherwise non be available and thus boost that kingdoms economic branch direct. TRUE26. (p. 258) There is research financial support the view that multinational firms often transfer significant technology when they invest in a unknown sphere. TRUE27. (p. 258) Jobs created in local suppliers as a result of the MNEs enthronement funds and jobs created beca physical exercise of adjoind local expenditure by employees of the MNE ar ensamples of direct employment eff ects of FDI. FALSE28. (p. 258) armament country citizens that are employed by an MNE undermentioned an FDI are an example of an indirect effect of FDI. FALSE29. (p. 259) A countrys chemical equilibrium of payments grudges keep track of both its payments to and its receipts from other countries. TRUE30. (p. 259) A current account deficit exists when a country imports more than it exports. TRUE31. (p. 259) In recent years, the U.S. has run a persistent commensurateness of payments surplus. FALSE32. (p. 260) Host g both overnments sometimes worry that the subsidiaries of unknown MNEs may slang greater economic power than indigenous competitors. TRUE33. (p. 261) FDI does not benefit the server countrys balance of payments if the outside(prenominal) subsidiary creates accept for business firm-country exports of majuscule equipment, intermediate goods or complementary products. FALSE34. (p. 262) The term offshore production refers to FDI cutn to servethe domicile market. TR UE35. (p. 263) Countries cannot prohibit national firms from investing in certain countries for political reasons. FALSE36. (p. 264) The two most common methods of confining inward FDI are ownership restraints and performance choosements. TRUE37. (p. 265) The WTO has been very flourishing in efforts to initiate talks aimed at establishing a universal set of rules designed to promote the liberalization of FDI. FALSE38. (p. 266) Licensing is a good extract for firms in high-tech industries where protecting firm-specific expertise is of paramount importance. FALSE39. (p. 266-267) typicall(a)y licensing exit be a common system in oligopolies where rivalrous interdependence requires that multinational firms maintain nasty control over overseas operations so that they have the talent to launch coordinated attacks against their world(a) competitors. FALSE40. (p. 267) Licensing is more common in fragmented, low-tech industries in which ball-shapedly scatter manufacturing is not an option. TRUEMultiple Choice Questions41. (p. 242) FDI occurs when aA. municipal firm imports products and services from another country B. Firm ships its product from one country to anotherC. Firm invests in the stock of another followD. Firm invests directly in facilities to produce and/or market a product in a contrasted country42. (p. 242) A Greenfield investingA. Is a form of FDI that involves the establishment of a new operation in a foreign country B. Involves a 7 percent stock in an acquired foreign business entity C. Involves a merger with a foreign businessD. Occurs when a firm acquires another company in a foreign countr 43. (p. 242) If General Electric, a U.S. based corporation, purchased a 50% interest in a company in Italy, that purchase would be an example of a(n) A. Minority acquisitionB. Out right hand stakeC. Majority acquisitionD. Greenfield investment44. (p. 242) The amount of FDI undertaken over a given time period is A. The flow of FDIB. The stock of FDIC . The FDI outflowD. The FDI inflow45. (p. 242) The stock of FDI isA. The amount of FDI undertaken over a given period of timeB. The total accumulated value of foreign owned assets at a given time C. The flow of FDI out of a countryD. The flow of FDI into a country46. (p. 242) FDI has been rising for all of the following reasons, and A. The globalization of the world economyB. The general increase in trade barriers over the past 30 years C. Firms are trying to circumvent trade barriersD. There is a vend toward elected political institutions and free market economies47. (p. 244) Historically, most FDI has been directed at the _____ nations of the world as firms based in advanced countries invested in A. Underdeveloped, underdevelop countriesB. Developed, underdeveloped countriesC. Developed, each others marketsD. Underdeveloped, each others markets48. (p. 244) The U.S. has been an fetching laughingstock for FDI because of all of the following reasons, except A. Its small and wea lthy municipal marketsB. Its dynamic and stable economyC. Its favorable political environmentD. Its bareness to FDI49. (p. 244) Identify the incorrect statement regarding the direction of FDI. A. Historically, most FDI has been directed at the ontogenesis nations of the world B. During the 1980s and 1990s, the United States was often the favorite target for FDI inflows C. The developed nations of the EU have received significant FDI inflows D. Recent inflows into developing nations have been targeted at the emerging economies of South, East and Southeast Asia 50. (p. 246) Africa is not a popular destination for FDI because of all of the following reasons, except A. Political zymosis in the regionB. Armed conflict in the regionC. relaxation behavior of FDI regulationsD. Frequent policy changes in the region51. (p. 246) The total amount of capital invested in factories, stores, office buildings and the like is summarized by A. Gross fixed capital formationB. Total investment capit alC. Total tangible investmentD. Gross depreciable investments52. (p. 246) The largest source country for FDI since World War II has been A. lacquerB. ChinaC. The United StatesD. The United Kingdom53. (p. 247) Most cross-border investment isA. In the form of Greenfield investmentsB. Made via mergers and acquisitionsC. Between American and Japanese companiesD. Involved in building new facilities54. (p. 247) Which of the following is not a reason wherefore firms prefer toacquire existing assets sooner than undertake green-field investments? A. Foreign firms are acquired because those firms have valuable strategic assets B. Firms make acquisitions because they believe they can increase the efficiency of the acquired unit by transferring capital, technology or management skills C. up to now though Greenfield investments are comparatively less risky for a firm acquisitions always yield higher profits D. Mergers and acquisitions are quicker to act than green-field investments 55. (p. 247) In developing nations most FDI inflows are in the form of A. MergersB. Greenfield investmentsC. AcquisitionsD. Non-profit organizations56. (p. 248) The firmament composition of FDI shows that by 2004 approximately _____ of FDI stock was in service industries. A. One fourthB. One thirdC. Two thirdD. Half57. (p. 248) The rise in FDI in the services sector is a result of all of the following, except A. The general move in many developed countries onward from manufacturing and toward services B. Accelerating regulations of servicesC. numerous services cannot be traded internationallyD. Many countries have liberalized their regimes governing FDI in services 58. (p. 248) When strategic assets much(prenominal) as brand loyalty, customer relationships or distribution systems are important, _____ investments are more appropriate. A. Merger and acquisitionB. GreenfieldC. PortfolioD. New construction59. (p. 249) _____ involves granting a foreign entity the right to produce and sell th e firms product in hang for a royalty payment on every(prenominal) unit sold. A. plain FDIB. LicensingC. Vertical FDID. Greenfield investment60. (p. 249) In a licensing arrangement, the _____ bears the risk and constitute of source a foreign market. A. LicenseeB. LicensorC. Acquiring firmD. Greenfield investor61. (p. 250) Identify the possibility that seeks to explain why firms often prefer foreign direct investment over licensing as a strategy for entering foreign markets. A. Internalization systemB. Internationalization hypothesisC. Perfect markets hypothesisD. Small markets theory62. (p. 250) According to the internalization theory, all of the following are drawbacks of licensing as a strategy for exploiting foreign market opportunities, except A. Licensing does not grant control over manufacturing, marketing and to a licensee in return for a royalty fee B. Licensing may result in a firms giving away its know-how to a potential foreign competitor C. Licensing does not gi ve the firm the tight control over manufacturing, marketing and strategy that may be required to profitably exploit its advantage D. A firms capabilities much(prenominal) as the management, marketing and manufacturing are often not amenable to licensing 63. (p. 250) ______ is also cognize as market imperfections theory. A. Internationalization theoryB. Internalization theoryC. Perfect markets theoryD. Small markets theory64. (p. 251) If four firms control 80 percent of a domestic market, then ______ exists. A. An oligopolyB. A monopolyC. An oligarchyD. Vertical consolidation65. (p. 251) According to KnickerbockerA. The firms that pioneer a product in their home markets undertake FDI toproduce a product for inspiration in a foreign market B. When a firm that is part of an oligopolistic industry expands into a foreign market, other firms in the industry exit be compelled to make confusable investments C. Combining location-specific assets or resource endowments and the firms own alone(p) assets often requires FDI D. Impediments to the deal of know-how increase the positivity of FDI relative to licensing 66. (p. 252) The eclectic mental image was developed byA. F. T. KnickerbockerB. Adam SmithC. light beammond VernonD. John Dunning67. (p. 252) When two or more enterprises encounter each other in divergent regional markets, national markets or industries, there is A. Vertical integratingB. Horizontal integrationC. Multipoint rivalD. Monopolistic competition68. (p. 252) The product life cycle suggests thatA. practically the same firms that pioneer a product in their home markets undertake FDI to produce a product for consumption in foreign markets B. When a firm that is part of an oligopolistic industry expands into a foreign market, other firms in the industry result be compelled to make similar investments C. Combining location-specific assets or resource endowments and the firms own unique assets often requires FDI D. Impediments to the sale of know-how increase the profitability of FDI relative to licensing 69. (p. 253) The _____ suggests that a firm result establish production facilities where foreign assets or resource endowments that are important to the firm are located. A. Product life cycleB. Strategic behavior theoryC. Multipoint competition theoryD. Eclectic paradigm70. (p. 253) Advantages that arise from using resource endowments or assets that are tied to a busy location and that a firm finds valuable to mix with its own unique assets are known as A. Location specific advantagesB. Resource specific advantagesC. Competitive advantagesD. directional advantages71. (p. 253) John Dunning, a champion of the eclectic paradigm, argues that A. The firms that pioneer a product in their home markets undertake FDI to produce a product for consumption in a foreign market B. When a firm that is part of an oligopolistic industry expands into a foreign market, other firms in the industry will be compelled to make similar in vestments C. Combining location-specific assets or resource endowments and the firms own unique assets often requires FDI D. Impediments to the sale of know-how increase the profitability of FDI relative to licensing72. (p. 254) According to the _____ view of FDI, MNEs extract profits from the boniface country and take them to their home country, giving nothing of value to the host country in exchange. A. ImperialistB. ConservativeC. Free marketD. Radical73. (p. 254) Which of the following is not a reason that the report position of MNEs was in put out by the end of the 1980s? A. The strong economic performance of those developing countries that embraced capitalism alternatively than stand ideology B. The collapse of communism in Eastern EuropeC. The generally abysmal economic performance of those countries that embraced the radical position D. A growing belief in many capitalist countries that MNEs tightly controls key technology and that important jobsin the MNEs foreign sub sidiaries go to home-country nationals74. (p. 255) According to _____ international production should be distributed among countries fit to the theory of comparative advantage. A. The radical viewB. The eclectic viewC. Pragmatic nationalismD. The free market view75. (p. 256) A distinctive aspect of _____ is the inclining to aggressively court FDI believed to be in the national interest by, for example, crack subsidies to foreign MNEs in the form of tax breaks or grants. A. The dogmatic viewB. Pragmatic nationalismC. The radical viewD. The conservative view76. (p. 257) When a company brings capital and/or technology to a host country, the host country benefits from the A. Competitive effect of FDIB. The resource transfer effect of FDIC. The balance of payments effect of FDID. The effect on competition and economic growth77. (p. 258) When jobs are created in local suppliers as a result of the FDI and when jobs are created because of change magnitude local spending by employees of the MNE, the MNE has a _____ effect on employment. A. DirectB. IndirectC. InwardD. Outward78. (p. 259) A _____ keeps track of a countrys payments to and its receipts from other countries. A. Federal payments ledgerB. accredited accounting system systemC. Checks and balances accountD. Balance of payments account79. (p. 259) The _____ tracks the export and import of goods and services. A current account deficit or trade deficit as it is often called, arises when a country is importing more goods and services than it is exporting. A. Current accountB. Debit accountC. Surplus accountD. Capital account80. (p. 261) Three be of FDI concerns of host countries arise from all of the following except A. Adverse effects on competition within the host nationB. Adverse effects on the balance of paymentsC. The perceived loss of national sovereignty and autonomyD. Debit on the current account of the home countrys balance of payments81. (p. 262) FDI undertaken to serve the home market is known as A. Greenfield investmentB. FDI substitutionC. Offshore productionD. Home market FDI82. (p. 263) Double taxation isA. Charging effigy taxes in the home countryB. Charging double taxes in the host countryC. Taxation of income in both home and host countryD. Paying income taxes at twice the normal rate83. (p. 264) _____ are controls over the behavior of the MNEs local subsidiary. A. Performance requirementsB. possession restraintsC. Double taxation lawsD. Greenfield restrictions84. (p. 267) Licensing would be a good option for firms in which of thefollowing industries? A. High-technology industries in which protecting firm-specific expertise is of paramount importance and licensing is violent B. Global oligopolies, in which combative interdependence requires that multinational firms maintain tight control over foreign operations C. Industries in which intense cost pressures require that multinational firms maintain tight control over foreign operations D. In fragmented, low techn ology industries in which globally dispersed manufacturing is not an option85. (p. 267) _____ is essentially the service industry version of licensing, although it unremarkably involves much longer term commitments. A. FranchisingB. SubsidizingC. Greenfield investmentD. PatentingEssay Questions86. (p. 242) cover the fellowship between foreign direct investment and multinational enterprises?Foreign direct investment (FDI) occurs when a firm invests directly in new facilities to produce and/or market a product in a foreign country. The U.S. Department of Commerce states that FDI occurs whenever a U.S. citizen, organization or affiliated assembly takes an interest of 10 percent or more in a foreign business entity. Once affirm undertakes FDI, it becomes a multinational enterprise.87. (p. 242) What are the two forms of foreign direct investment? The two forms of FDI are Greenfield investment or establishing a new operation in a foreign country and mergers and acquisitions whereby a company expands internationally through an existing firm. Acquisitions can be minority, majority or a 100% ownership position. 88. (p. 242) Discuss the trends in FDI over the last 30 years. Be sure to fall apart between the stock of FDI and the flow if FDI. The flow of FDI refers to the amount of FDI undertaken over a given period, while the stock of FDI refers to the total accumulated value of foreign-owned assets at a given time. oer the last 30years there has been a marked increase in both the flow and the stock of FDI in the world economy. Over this period, the flow of FDI accelerated faster than the growth in world trade and world output. 89. (p. 242) Discuss the reasons for the growth in FDI over the last 30 years. FDI has grown more rapidly than world trade and world output for several reasons. First, many companies see FDI as a means of circumventing potential trade barriers. Second, political and economic changes in many of the world developing nations has been encouragin g FDI. Finally, the globalization of the world economy is having a positive impact on the volume of FDI as firms now see the whole world as their market. 90. (p. 242-248) What is a Greenfield investment? How does it equalize to an acquisition? Which form of FDI is a firm more likely remove? Explain your answer. FDI can take the form of a Greenfield investment in a new facility or an acquisition of or a merger with an existing local firm. Research shows that most FDI takes the form of mergers and acquisitions instead than Greenfield investment.Mergers and acquisitions are more popular for three reasons. First, mergers and acquisitions are quicker to complete than Greenfield investments. Second, foreign firms are acquired because those firms have valuable strategic assets. Third, firms make acquisitions because they believe they can increase the efficiency of the acquired firm by transferring capital, technology or management skills. 91. (p. 248) Discuss the shift in FDI from manu facturing to services. What is driving the trend? Over the last twenty years, the sector composition of FDI has shifted from extractive industries and manufacturing toward services. By 2004, some 66 percent of the stock of FDI was in services. Four factors are driving the shift to services. First, the shift reflects the general move in many developed economies away from manufacturing and toward service industries. Second, many services cannot be traded internationally and FDI is a atomic number 82 was to bring services to foreign markets. Third, many countries have liberalized their regimes governing FDI in services making the option more attractive to firms. Finally, the rise of Internet-based global telecommunications networks has allowed some service enterprises to relocate some of their value creation activities to different nations to take advantage of favorable factor costs.92. (p. 249) Consider why firms exchange products with low value-to-weightratios choose FDI over expor ting. Products with low value-to-weight ratios such as crackers drinks or cement are frequently produced in the market where they are consumed. When transportation costs are added to production costs, it becomes unprofitable to shift such products over a long distance. For firms that can produce low value-to-weight products at almost any location the attractiveness of exporting decreases and FDI or licensing becomes more appealing. 93. (p. 250) Discuss the market imperfections interpretation of FDI. What is its relationship with internalization theory? securities industry imperfections or factors that inhibit markets from working perfectly, provide a major explanation of why firms prefer FDI to either exporting or licensing. In the international business literature, the marketing imperfections approach is referred to as internalization theory. According to the theory, FDI will be preferred when there are impediments that make both exporting and the sale of know-how difficult and/ or expensive. 94. (p. 250) What is licensing? How does it work?Licensing occurs when a domestic firm, the licensor, licenses to a foreign firm, the licensee, the right to produce its product, to use its production processes or to use its brand name or trademark. In return, the licensor collects royalty fees on every unit the licensee sells or on total licensee revenues. The licensor also benefits from the arrangement in that the licensee bears the cost and risk of expanding into a foreign market. 95. (p. 250) Compare and contrast the advantages of foreign direct investment over exporting and licensing. A firm will favor foreign direct investment over exporting as an entry strategy when transportation costs or trade barriers make exporting unattractive. Furthermore, the firm will favor foreign direct investment over licensing (or franchising) when it wishes to maintain control over its technological know-how or over its operations and business strategy or when the firms capabilities are simply not amenable to licensing, as may often be the case. 96. (p. 251) Consider the notion that FDI flows are a reflection of strategic ambition between firms in the global marketplace. What is the main limitation of the theory? The strategic behavior approach to explain FDI was initially expounded by Knickerbockers who argued that in an oliogopolistic industry, a follow the leader mentality will prompt firms to pursue FDI when another firm in the industryhas already done so. However, the theory fails to explain why the first firm decided to undertake FDI, rather than export or license. 97. (p. 252)What is multipoint competition? How do firms respond to multipoint competition? Multipoint competition arises when two or more enterprises encounter each other in different regional markets, national markets or industries. Economic theory suggests that firms will try to match each others moves in different markets to try to hold each other in check. If a firm is successful with thi s strategy, the firm will ensure that a rival does not take a commanding position in one market and then use the profits generated in that market to underwrite competitive attacks in other markets. 98. (p. 252) Explain the product life cycle theory and its connection with FDI. The product life cycle theory, developed by Ray Vernon, suggests that the same firms that pioneer a product in their home country will undertake FDI to produce a product for consumption in foreign markets. According to the theory, firms will invest in industrialized countries when demand in those countries is sufficient to support local production. They subsequently shift production to developing countries when product standardization and market saturation give rise to price competition and cost pressures. Investment in developing countries, where aim costs are lower is seen as the trounce way to trim back costs. 99. (p. 252-253) What are location-specific advantages? How do they help explain FDI? Location specific advantages are advantages that arise from using resource endowments or assets that are tied to a particular foreign location and that a firm finds valuable to combine with its own unique assets. Natural resources such as oil and minerals for example, are specific to certain locations. Firms must undertake FDI to exploit such foreign resources. 100. (p. 253) Explain John Dunnings position on FDI. What is the eclectic paradigm? John Dunning has argued that to fully understand FDI it is important to consider the role of location specific advantages.According to Dunning, a firm will be prompted to undertake FDI in an effort to exploit assets that are specific to a particular location. Dunnings theory, the eclectic paradigm, combines the arguments of internalization theory with the notion of location-specific advantages to suggest that feature location-specific assets or resource endowments and the firms own unique capabilities often requires the firm to establish production fa cilities where the foreign assets or resource endowments arelocated. 101. (p. 254-256) Discuss the various political ideologies and their impact on foreign direct investment. The radical view writers argue that the multinational enterprise (MNE) is an instrument of imperialistic domination. The free market view argues that international production should be distributed among countries according to the theory of comparative advantage.The pragmatic nationalist view is that FDI has both benefits and costs. The radical view has a dogmatic radical stance that is hostile to all inward FDI The free market view is at the other extreme point and based on noninterventionist principle of free market economics. Between these two extremes is an approach called pragmatic nationalism. 102. (p. 257-262) Discuss the benefits and costs of FDI from the perspective of a host country and from the perspective of the home country. The main benefits of inward FDI for a host country arise from resource-tra nsfer effects, employment effects, balance-of-payments effects and effects on competition and economic growth. Three costs of FDI concern host countries. They arise from come-at-able uncomely effects on competition within the host nation, adverse effects on the balance of payments and the perceived loss of national sovereignty and autonomy. The benefits of FDI to the home (source) country arise from three sources. First, the home countrys balance of payments benefits from the inward flow of foreign earnings. Second, benefits to the home country from outer FDI arise from employment effects. Third, benefits arise when the home-country MNE learns valuable skills from its exposure to foreign markets that can subsequently be transferred back to the home country. The most important cost/concern of FDI for the home country centers on the balance-of-payments and employment effects of outbound FDI.103. (p. 266-267) Describe the situations when licensing is not a good option for a firm. L icensing is not a good option in three situations. First, licensing is hazardous in high-tech industries where protecting firm-specific expertise is very important. Second, licensing is not attractive in global oligopolies where tight control is necessary so that firms have the ability to launch coordinated attacks against global competitors. Finally, in industries where intense cost pressures require that MNEs maintain tight control over foreign operations, licensing is not the best option. 104. (p. 267) What is franchising? What type of firm usesfranchising as a means of expanding into foreign markets? Franchising is essentially the service-industry version of licensing. With franchising, the firm licenses its brand name to a foreign firm in return for a percentage of the franchisees profits. The franchising contract specifies the conditions that the franchisee must fulfill if it is to use the franchisors brand name. Franchise agreements usually have a longer time commitment than do licensing arrangements. Franchising is common in the fast food industry because fast food cannot be exported, because franchising minimizes the costs and risks associated with opening a foreign market, because brand names are relatively easy to protect, because there is no compelling reason for a firm to have tight control over franchisees and because fast food know-how is soft transferred.105. (p. 267) How useful are the product life cycle theory and Knickerbockers theory of horizontal FDI to business? The product life cycle theory and Knickerbockers theory of horizontal FDI to business are not specially useful from a business perspective because the theories are descriptive rather than analytical. The theories are useful for explaining historical patterns of FDI, but they do a poor people job of identifying the factors that influence the relative probability of FDI, licensing and exporting.