Chapter 1
Expanding abroad:
Motivations, means, and mentalities
True/False
1. The largest MNEs are equivalent in their economic importance to less developed economies T T T T T
such as Nigeria, Moldova, or Jamaica.
T T T T T
ANS:False (Sales of the largest MNEs exceed the GDPs of less developed countries.)
T T T T T T T T T T T T T
Difficulty: Moderate T
Pg: 16 and Table 1.3 (16)
T T T T T
Subject: MNE influence in the global economy
T T T T T T
2. The process of internationalization followed by most firms is usually well-thought out in
T T T T T T T T T T T T T
advance and typically builds on a combination of rational analysis, planning and
T T T T T T T T T T T T
implementation.
ANS:False (It is more likely a combination of rational analysis, opportunism, and luck. In
T T T T T T T T T T T T T T
regards to opportunism, several studies have found that most firms begin exporting due to an
T T T T T T T T T T T T T T T
unsolicited export order.) T T
Difficulty: Moderate T T
Pg: 22-23
T
Subject: The Process of Internationalization
T T T T
3. All companies internationalize in an incremental manner. First, they make an initial
T T T T T T T T T T T T
commitment of resources to the foreign market in order to secure local market knowledge.
T T T T T T T T T T T T T T
Building on this knowledge, they make subsequent resource commitments, eventually
T T T T T T T T T T
leading to higher levels of investment in the foreign market.
T T T T T T T T T
ANS:False (There are many exceptions to the incremental approach. Some firms are “born
T T T T T T T T T T T T T
globals”. Other firms retain the same mode, including level of subsidiary involvement, in all
T T T T T T T T T T T T T T
foreign markets.)
T
Difficulty: Moderate T T
Pg: 23
T
Subject: The Process of Internationalization
T T T T
4. A joint venture is a contractual mode of foreign entry involving a high level of resource
T T T T T T T T T T T T T T T T
commitment by all partners. T T T
ANS:False (A JV will not typically require as high a resource commitment as we would see in
T T T T T T T T T T T T T T T T T
wholly owned subsidiaries. In addition, there is significant variability in the level of resources
T T T T T T T T T T T T T T
contributed by partners.) T T
1
,Difficulty: Moderate Pg: T T
24 (Figure 1.2) Subject:
T T T
Foreign entry modeT T
5. Emerging motivations for internationalization include the desire to enhance the firm’s
T T T T T T T T T T T
competitive position and the desire to develop global scanning capabilities.
T T T T T T T T T
ANS:True T
Difficulty:
ModeratePg:
19-20
Subject: Emerging Motivations
T T
6. For an MNE to exist, first foreign countries must provide location-specific advantages to
T T T T T T T T T T T T T
attract the company to invest there, second the company must have ownership-specific
T T T T T T T T T T T T
advantages that counteract its liability of foreignness, third the company must have the
T T T T T T T T T T T T T
organizational capability to leverage its strategic advantages more effectively internally than
T T T T T T T T T T T
externally.
ANS:True T
Difficulty: Moderate T T
Pg: 22T
Subject: Prerequisites for internationalization
T T T
7. An MNE with an ‘international mentality’ will typically be managed as a coordinated
T T T T T T T T T T T T T
federation.
ANS:True T
Difficulty: Moderate T T
Pg: 26T
Subject: The evolving mentality: international to transnational
T T T T T T
8. An MNE with a ‘multinational mentality’ will typically be managed as a coordinated
T T T T T T T T T T T T T
federation.
ANS:False (It will typically be managed as a decentralized federation.)Difficulty:
T T T T T T T T T T
Moderate
Pg: 26-27
T
Subject: The evolving mentality: international to transnational
T T T T T T
9. An MNE with a ‘global mentality’ will typically manage its operations centrally.
T T T T T T T T T T T
2
,ANS:True T
Difficulty: Moderate T T
Pg: 27T
Subject: The evolving mentality: international to transnational
T T T T T T
10. An MNE with a ‘transnational mentality’ will typically be managed as an integrated network.
T T T T T T T T T T T T T
ANS:True T
Difficulty: Moderate T T
Pg: 27T
Subject: The evolving mentality: international to transnational
T T T T T T
11. The core advantage multinational mentality has over global mentality is more efficient
T T T T T T T T T T T T
manufacturing.
ANS:False (it is the other way around)Difficulty:
T T T T T T
Moderate T
Pg: 26-27
T
Subject: The evolving mentality: international to transnational
T T T T T T
12. Raymond Vernon’s article “Gone are the cash cows of yesteryear” highlights a company’s
T T T T T T T T T T T T T
global scanning and learning capability.
T T T T
ANS:True T
Difficulty: Hard T
Pg 19 (footnote 10)
T T T
Subject: Emerging Motivations
T T
13. Only one article further develops the idea that “the process of developing these strategic and
T T T T T T T T T T T T T T T
organizational attributes lies at the heart of the internationalization process through which a
T T T T T T T T T T T T T
company builds its position in world markets. T T T T T T
ANS:False (2 articles further develop the idea: A. Jonsson and N. J. Foss, “International
T T T T T T T T T T T T T T
expansion through flexible replication: learning from the internationalization experience of
T T T T T T T T T T
IKEA,” Journal of International Business Studies, 42:9 (2011),
T T T T T T T
1079–1102 and J. W. Lu and P. W. Beamish, “International diversification and firm
T T T T T T T T T T T T T
performance: the S-curve hypothesis,” Academy of Management Journal, 47:4 (2004), 598–609.)
T T T T T T T T T T T
Difficulty: Hard T
Pg: 22-23 (footnote 15)
T T T
Subject: Process of Internationalization
T T T
3
, Multiple Choice T
14. An MNE is a(n):
T T T
a. import-export company that actively trades in foreign markets. T T T T T T T
b. company that passively manages its substantial foreign direct investment.
T T T T T T T T
c. import-export company that actively manages its foreign investment portfolio. T T T T T T T T
d. company that actively manages substantial foreign direct investment.
T T T T T T T
ANS:d (A true MNE is a company that has substantial direct investment in foreign countries,
T T T T T T T T T T T T T T T
and that actively manages and regards its foreign operations as integral parts of the company,
T T T T T T T T T T T T T T T
both strategically and organizationally. Companies that either do not hold equity positions or
T T T T T T T T T T T T T
hold minor equity positions in overseas ventures without or with very low management
T T T T T T T T T T T T
involvement may be viewed as “international” companies but would not be regarded as
T T T T T T T T T T T T T
multinational enterprises.) T
Difficulty: Moderate T T
Pg: 12T
Subject: MNE definition T T
15. Three prerequisites that must be satisfied before a national firm can transform itself into a
T T T T T T T T T T T T T T T
multinational firm include: T T
a. scale-based advantages, ownership-specific advantages, and contractual capabilities.
T T T T T T
b. location-specific advantages, ownership-specific advantages, and organizational capabilities. T T T T T T
c. scale-based advantages, ownership-specific advantages, and organizational capabilities.
T T T T T T
d. location-specific advantages, knowledge advantages, and organizational capabilities. T T T T T T
ANS:b (a, c, and d are incorrect since scale-based advantages, knowledge-based advantages,
T T T T T T T T T T T T
and contractual capabilities are, by themselves, insufficient to justify the internationalization
T T T T T T T T T T T
of operations. With much less effort a company often can sell or license itstechnology to
T T T T T T T T T T T T T T T
foreign producers, franchise its brand name internationally, or sell its products abroad through
T T T T T T T T T T T T T
local distributors, without having to set up its own offshore operations.) Difficulty: Moderate
T T T T T T T T T T T T T
to hard
T
Pg: 22T
Subject: Prerequisites for internationalization
T T T
16. Which of the following correctly describes the sequential evolution in management thinking
T T T T T T T T T T T T
with respect to the strategic role of foreign operations in emerging MNEs?
T T T T T T T T T T T
a. global mentality, multinational mentality, international mentality, transnational mentality.
T T T T T T T
b. international mentality, global mentality, transnational mentality, multinational mentality.
T T T T T T T
c. multinational mentality, global mentality, international mentality, transnational mentality.
T T T T T T T
d. international mentality, multinational mentality, global mentality, transnational mentality.
T T T T T T T
ANS:d (a, b, and c are incorrect since, although they describe the different ways of management
T T T T T T T T T T T T T T T T
thinking regarding the strategic role of foreign operations in emerging MNEs, theydo not
T T T T T T T T T T T T T
describe the evolution of this thinking in the correct sequence.)
T T T T T T T T T
4
Expanding abroad:
Motivations, means, and mentalities
True/False
1. The largest MNEs are equivalent in their economic importance to less developed economies T T T T T
such as Nigeria, Moldova, or Jamaica.
T T T T T
ANS:False (Sales of the largest MNEs exceed the GDPs of less developed countries.)
T T T T T T T T T T T T T
Difficulty: Moderate T
Pg: 16 and Table 1.3 (16)
T T T T T
Subject: MNE influence in the global economy
T T T T T T
2. The process of internationalization followed by most firms is usually well-thought out in
T T T T T T T T T T T T T
advance and typically builds on a combination of rational analysis, planning and
T T T T T T T T T T T T
implementation.
ANS:False (It is more likely a combination of rational analysis, opportunism, and luck. In
T T T T T T T T T T T T T T
regards to opportunism, several studies have found that most firms begin exporting due to an
T T T T T T T T T T T T T T T
unsolicited export order.) T T
Difficulty: Moderate T T
Pg: 22-23
T
Subject: The Process of Internationalization
T T T T
3. All companies internationalize in an incremental manner. First, they make an initial
T T T T T T T T T T T T
commitment of resources to the foreign market in order to secure local market knowledge.
T T T T T T T T T T T T T T
Building on this knowledge, they make subsequent resource commitments, eventually
T T T T T T T T T T
leading to higher levels of investment in the foreign market.
T T T T T T T T T
ANS:False (There are many exceptions to the incremental approach. Some firms are “born
T T T T T T T T T T T T T
globals”. Other firms retain the same mode, including level of subsidiary involvement, in all
T T T T T T T T T T T T T T
foreign markets.)
T
Difficulty: Moderate T T
Pg: 23
T
Subject: The Process of Internationalization
T T T T
4. A joint venture is a contractual mode of foreign entry involving a high level of resource
T T T T T T T T T T T T T T T T
commitment by all partners. T T T
ANS:False (A JV will not typically require as high a resource commitment as we would see in
T T T T T T T T T T T T T T T T T
wholly owned subsidiaries. In addition, there is significant variability in the level of resources
T T T T T T T T T T T T T T
contributed by partners.) T T
1
,Difficulty: Moderate Pg: T T
24 (Figure 1.2) Subject:
T T T
Foreign entry modeT T
5. Emerging motivations for internationalization include the desire to enhance the firm’s
T T T T T T T T T T T
competitive position and the desire to develop global scanning capabilities.
T T T T T T T T T
ANS:True T
Difficulty:
ModeratePg:
19-20
Subject: Emerging Motivations
T T
6. For an MNE to exist, first foreign countries must provide location-specific advantages to
T T T T T T T T T T T T T
attract the company to invest there, second the company must have ownership-specific
T T T T T T T T T T T T
advantages that counteract its liability of foreignness, third the company must have the
T T T T T T T T T T T T T
organizational capability to leverage its strategic advantages more effectively internally than
T T T T T T T T T T T
externally.
ANS:True T
Difficulty: Moderate T T
Pg: 22T
Subject: Prerequisites for internationalization
T T T
7. An MNE with an ‘international mentality’ will typically be managed as a coordinated
T T T T T T T T T T T T T
federation.
ANS:True T
Difficulty: Moderate T T
Pg: 26T
Subject: The evolving mentality: international to transnational
T T T T T T
8. An MNE with a ‘multinational mentality’ will typically be managed as a coordinated
T T T T T T T T T T T T T
federation.
ANS:False (It will typically be managed as a decentralized federation.)Difficulty:
T T T T T T T T T T
Moderate
Pg: 26-27
T
Subject: The evolving mentality: international to transnational
T T T T T T
9. An MNE with a ‘global mentality’ will typically manage its operations centrally.
T T T T T T T T T T T
2
,ANS:True T
Difficulty: Moderate T T
Pg: 27T
Subject: The evolving mentality: international to transnational
T T T T T T
10. An MNE with a ‘transnational mentality’ will typically be managed as an integrated network.
T T T T T T T T T T T T T
ANS:True T
Difficulty: Moderate T T
Pg: 27T
Subject: The evolving mentality: international to transnational
T T T T T T
11. The core advantage multinational mentality has over global mentality is more efficient
T T T T T T T T T T T T
manufacturing.
ANS:False (it is the other way around)Difficulty:
T T T T T T
Moderate T
Pg: 26-27
T
Subject: The evolving mentality: international to transnational
T T T T T T
12. Raymond Vernon’s article “Gone are the cash cows of yesteryear” highlights a company’s
T T T T T T T T T T T T T
global scanning and learning capability.
T T T T
ANS:True T
Difficulty: Hard T
Pg 19 (footnote 10)
T T T
Subject: Emerging Motivations
T T
13. Only one article further develops the idea that “the process of developing these strategic and
T T T T T T T T T T T T T T T
organizational attributes lies at the heart of the internationalization process through which a
T T T T T T T T T T T T T
company builds its position in world markets. T T T T T T
ANS:False (2 articles further develop the idea: A. Jonsson and N. J. Foss, “International
T T T T T T T T T T T T T T
expansion through flexible replication: learning from the internationalization experience of
T T T T T T T T T T
IKEA,” Journal of International Business Studies, 42:9 (2011),
T T T T T T T
1079–1102 and J. W. Lu and P. W. Beamish, “International diversification and firm
T T T T T T T T T T T T T
performance: the S-curve hypothesis,” Academy of Management Journal, 47:4 (2004), 598–609.)
T T T T T T T T T T T
Difficulty: Hard T
Pg: 22-23 (footnote 15)
T T T
Subject: Process of Internationalization
T T T
3
, Multiple Choice T
14. An MNE is a(n):
T T T
a. import-export company that actively trades in foreign markets. T T T T T T T
b. company that passively manages its substantial foreign direct investment.
T T T T T T T T
c. import-export company that actively manages its foreign investment portfolio. T T T T T T T T
d. company that actively manages substantial foreign direct investment.
T T T T T T T
ANS:d (A true MNE is a company that has substantial direct investment in foreign countries,
T T T T T T T T T T T T T T T
and that actively manages and regards its foreign operations as integral parts of the company,
T T T T T T T T T T T T T T T
both strategically and organizationally. Companies that either do not hold equity positions or
T T T T T T T T T T T T T
hold minor equity positions in overseas ventures without or with very low management
T T T T T T T T T T T T
involvement may be viewed as “international” companies but would not be regarded as
T T T T T T T T T T T T T
multinational enterprises.) T
Difficulty: Moderate T T
Pg: 12T
Subject: MNE definition T T
15. Three prerequisites that must be satisfied before a national firm can transform itself into a
T T T T T T T T T T T T T T T
multinational firm include: T T
a. scale-based advantages, ownership-specific advantages, and contractual capabilities.
T T T T T T
b. location-specific advantages, ownership-specific advantages, and organizational capabilities. T T T T T T
c. scale-based advantages, ownership-specific advantages, and organizational capabilities.
T T T T T T
d. location-specific advantages, knowledge advantages, and organizational capabilities. T T T T T T
ANS:b (a, c, and d are incorrect since scale-based advantages, knowledge-based advantages,
T T T T T T T T T T T T
and contractual capabilities are, by themselves, insufficient to justify the internationalization
T T T T T T T T T T T
of operations. With much less effort a company often can sell or license itstechnology to
T T T T T T T T T T T T T T T
foreign producers, franchise its brand name internationally, or sell its products abroad through
T T T T T T T T T T T T T
local distributors, without having to set up its own offshore operations.) Difficulty: Moderate
T T T T T T T T T T T T T
to hard
T
Pg: 22T
Subject: Prerequisites for internationalization
T T T
16. Which of the following correctly describes the sequential evolution in management thinking
T T T T T T T T T T T T
with respect to the strategic role of foreign operations in emerging MNEs?
T T T T T T T T T T T
a. global mentality, multinational mentality, international mentality, transnational mentality.
T T T T T T T
b. international mentality, global mentality, transnational mentality, multinational mentality.
T T T T T T T
c. multinational mentality, global mentality, international mentality, transnational mentality.
T T T T T T T
d. international mentality, multinational mentality, global mentality, transnational mentality.
T T T T T T T
ANS:d (a, b, and c are incorrect since, although they describe the different ways of management
T T T T T T T T T T T T T T T T
thinking regarding the strategic role of foreign operations in emerging MNEs, theydo not
T T T T T T T T T T T T T
describe the evolution of this thinking in the correct sequence.)
T T T T T T T T T
4
