International Business - Chapter 7

Front 1

foreign direct investment

Back 1

purchase of physical assets or a significant amount of the ownership of a company in another country to gain a measure of management control

Front 2

portfolio investment

Back 2

investment that does not involve obtaining a degree of control in a company

Front 3

international product life cycle

Back 3

theory stating that a company will begin by exporting its product and later undertake foreign direct investment as a product moves through its life cycle

Front 4

market imperfections

Back 4

theory stating that when an imperfection in the market makes a transaction less efficient than it could be, a company will undertake foreign direct investment to internalize the transaction and thereby remove the imperfection

Front 5

eclectic theory

Back 5

theory stating that firms undertake foreign diect investment when the features of a particular location combine with ownership and internalization advantages to make a location appealing for investment

Front 6

market power

Back 6

theory stating that a firm tries to establish a dominant market presence in an industry by undertaking foreign direct investment

Front 7

vertical integration

Back 7

extension of company activities into stages of production that provide a firm's inputs or absorb its ouput

Front 8

rationalized production

Back 8

system of production in which each of a product's components is produced where the cost of producing that component is lowest

Front 9

balance of payments

Back 9

national accounting system that records all payments to entities in other countries and all receipts coming into the nation

Front 10

current account surplus

Back 10

national account that records transactions involving the import and export of goods and services, income receipts on assets abroad, and income payments on foreign assets inside the country

Front 11

current account surplus

Back 11

when a country exports more goods and services and receives more income from abroad than it imports and pays abroad

Front 12

current account deficit

Back 12

when a country imports more goods and services and pays more abroad than it exports and receives from abroad

Front 13

capital account

Back 13

national account that records transactions involving the purchase or sale of assets