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32 Cards in this Set
- Front
- Back
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Foreign direct investment (FDI)
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Putting money in activities that control and manage value-added activities in other countries
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Multinational enterprise (MNE)
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Firms that engage in FDI
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Foreign portfolio investment (FPI)
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Holding securities, such as stocks and bonds, of companies in countries outside one's own but does not entail the active management of foreign assets
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Management control rights
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Authority to appoint key managers and establish control mechanisms
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Horizontail FDI
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Producing the same products or offering the same services in a host country as firms do at home
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Vertical FDI
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Firm moves upstream or downstream in different value chain stages in a host country through FDI
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Upstream vertical FDI
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Using FDI in an earlier activity in the value chain
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Downstream vertical FDI
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Using FDI in a later activity in the value chain
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FDI flow
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Amount of FDI moving in a given period (usually a year) in a certain direction
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FDI inflow
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FDI moving into a country in a year
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FDI outflow
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FDI moving out of a country in a year
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FDI stock
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Total accumulation of inbound FDI in a country or outbound FDI from a country
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OLI advantages
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Quest for ownership (O) advantages, location (L) advantages, and internalization (l) advantages
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Ownership
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MNEs' possession and leveraging of certain valuable, rare, hard-to-imitate, and organizationally embedded (VRIO) assets overseas
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Location
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Features unique to a place, such as its natural or labor resources or its location near particular markets, that provide certain advantages to firms doing business there
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Internalization
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Replacement of cross-border markets (such as exporting and importing) with one firm (the MNE) locating and operating in two or more countries
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Licensing
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Selling technology or intellectual property for a fee
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Market imperfection
(market failure) |
Imperfect rules governing international transactions
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Dissemination risk
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Possibility of unauthorized diffusion of firm-specific know-how
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Agglomeration
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Clustering of economic activities in certain locations
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Knowledge spillover
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Diffusion of knowledge from one firm to others among closely located firms that attempt to hire individuals from competitors
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Location advantages
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the advantages one firm obtains when operating in a location due to its firm-specific capabilities
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Oligopoly
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An industry dominated by a small number of player
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Intrafirm trade
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Transactions occur between two subsidiaries in two countries controlled by the same MNE
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Radical view
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Treats FDI as an instrument of imperialism and a vehicle for exploiting domestic resources, industries, and people by foreign capitalists and firms
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Free market view
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Unrestricted by government Intervention FDI will enable countries to tap into their absolute or comparative advantages by specializing in the production of certain goods and services
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Pragmatic nationalism
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Considering both the pros and cons of FDI and approving FDI only when its benefits outweigh its costs
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Technology spillover
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Domestic diffusion of foreign technical knowledge and processes
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Demonstration effect
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Local rivals, after observing foreign technology, may recognize its feasibility and strive to imitate
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Contagion (imitation) effect
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Local rivals, after observing foreign technology, may recognize its feasibility and strive to imitate
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Bargaining power
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Ability to extract favorable outcome from negotiations due to one party's strengths
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Sovereign wealth fund (SWF)
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State-owned investment fund composed of financial assets such as stocks, bonds, real estate, or other financial instruments funded by foreign exchange assets
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