Chapterj1jExpandi
ngjabroad:
Motivations,jmeans,jandjmentalities
True/False
1. ThejlargestjMNEsjarejequivalentjinjtheirjeconomicjimportancejtojlessjdevelopedjeconomiesjsuc
hjasjNigeria,jMoldova,jorjJamaica.
ANS:Falsej(SalesjofjthejlargestjMNEsjexceedjthejGDPsjofjlessjdevelopedjcountries.)jDifficulty:j
Moderate
Pg:j16jandjTablej1.3j(16)
Subject:jMNEjinfluencejinjthejglobaljeconomy
2. Thejprocessjofjinternationalizationjfollowedjbyjmostjfirmsjisjusuallyjwell-
thoughtjoutjinjadvancejandjtypicallyjbuildsjonjajcombinationjofjrationaljanalysis,jplanningja
ndjimplementation.
ANS:Falsej(Itjisjmorejlikelyjajcombinationjofjrationaljanalysis,jopportunism,jandjluck.jInjregards
jtojopportunism,jseveraljstudiesjhavejfoundjthatjmostjfirmsjbeginjexportingjduejtojanjunsolicitedj
exportjorder.)
Difficulty:jModeratej
Pg:j22-23
Subject:jThejProcessjofjInternationalization
3. Alljcompaniesjinternationalizejinjanjincrementaljmanner.jFirst,jtheyjmakejanjinitialjcommitm
entjofjresourcesjtojthejforeignjmarketjinjorderjtojsecurejlocaljmarketjknowledge.jBuildingjonjth
isjknowledge,jtheyjmakejsubsequentjresourcejcommitments,jeventuallyjleadingjtojhigherjleve
lsjofjinvestmentjinjthejforeignjmarket.
ANS:Falsej(Therejarejmanyjexceptionsjtojthejincrementaljapproach.jSomejfirmsjarej“bornjglobal
s”.jOtherjfirmsjretainjthejsamejmode,jincludingjleveljofjsubsidiaryjinvolvement,jinjalljforeignjmar
kets.)
Difficulty:jModeratej
Pg:j23
Subject:jThejProcessjofjInternationalization
4. Ajjointjventurejisjajcontractualjmodejofjforeignjentryjinvolvingjajhighjleveljofjresourcejcom
mitmentjbyjalljpartners.
ANS:Falsej(AjJVjwilljnotjtypicallyjrequirejasjhighjajresourcejcommitmentjasjwejwouldjseejinjwhol
lyjownedjsubsidiaries.jInjaddition,jtherejisjsignificantjvariabilityjinjthejleveljofjresourcesjcontribut
edjbyjpartners.)
1
,Difficulty:j ModeratejPg:
24j(Figurej1.2)jSubject:
Foreignjentryjmode
5. Emergingjmotivationsjforjinternationalizationjincludejthejdesirejtojenhancejthejfirm’sjco
mpetitivejpositionjandjthejdesirejtojdevelopjglobaljscanningjcapabilities.
ANS:TruejDiffi
culty:
ModeratePg:
19-20
Subject:jEmergingjMotivations
6. ForjanjMNEjtojexist,jfirstjforeignjcountriesjmustjprovidejlocation-
specificjadvantagesjtojattractjthejcompanyjtojinvestjthere,jsecondjthejcompanyjmustjhavejowner
ship-
specificjadvantagesjthatjcounteractjitsjliabilityjofjforeignness,jthirdjthejcompanyjmustjhavejthej
organizationaljcapabilityjtojleveragejitsjstrategicjadvantagesjmorejeffectivelyjinternallyjthanjext
ernally.
ANS:TruejDifficulty
:jModeratejPg:j22
Subject:jPrerequisitesjforjinternationalization
7. AnjMNEjwithjanj‘internationaljmentality’jwilljtypicallyjbejmanagedjasjajcoordinatedjfed
eration.
ANS:TruejDifficulty
:jModeratejPg:j26
Subject:jThejevolvingjmentality:jinternationaljtojtransnational
8. AnjMNEjwithjaj‘multinationaljmentality’jwilljtypicallyjbejmanagedjasjajcoordinatedjfed
eration.
ANS:Falsej(Itjwilljtypicallyjbejmanagedjasjajdecentralizedjfederation.)Difficulty:jModerate
Pg:j26-27
Subject:jThejevolvingjmentality:jinternationaljtojtransnational
9. AnjMNEjwithjaj‘globaljmentality’jwilljtypicallyjmanagejitsjoperationsjcentrally.
2
,ANS:TruejDifficulty
:jModeratejPg:j27
Subject:jThejevolvingjmentality:jinternationaljtojtransnational
10. AnjMNEjwithjaj‘transnationaljmentality’jwilljtypicallyjbejmanagedjasjanjintegratedjnetwork.
ANS:TruejDifficulty
:jModeratejPg:j27
Subject:jThejevolvingjmentality:jinternationaljtojtransnational
11. Thejcorejadvantagejmultinationaljmentalityjhasjoverjglobaljmentalityjisjmorejefficientjma
nufacturing.
ANS:Falsej(itjisjthejotherjwayjaround)Difficulty:
Moderatej
Pg:j26-27
Subject:jThejevolvingjmentality:jinternationaljtojtransnational
12. RaymondjVernon’sjarticlej“Gonejarejthejcashjcowsjofjyesteryear”jhighlightsjajcompany’sjglo
baljscanningjandjlearningjcapability.
ANS:TruejDiffi
culty:jHard
Pgj19j(footnotej10)
Subject:jEmergingjMotivations
13. Onlyjonejarticlejfurtherjdevelopsjthejideajthatj“thejprocessjofjdevelopingjthesejstrategicjandjorga
nizationaljattributesjliesjatjthejheartjofjthejinternationalizationjprocessjthroughjwhichjajcompan
yjbuildsjitsjpositionjinjworldjmarkets.
ANS:Falsej(2jarticlesjfurtherjdevelopjthejidea:jA.jJonssonjandjN.jJ.jFoss,j“Internationaljexpans
ionjthroughjflexiblejreplication:jlearningjfromjthejinternationalizationjexperiencejofjIKEA,”jJ
ournaljofjInternationaljBusinessjStudies,j42:9j(2011),
1079–
1102jandjJ.jW.jLujandjP.jW.jBeamish,j“Internationaljdiversificationjandjfirmj performance:jthejS-
curvejhypothesis,”jAcademyjofjManagementjJournal,j47:4j(2004),j598–609.)jDifficulty:jHard
Pg:j22-23j(footnotej15)
Subject:jProcessjofjInternationalization
3
, MultiplejChoice
14. AnjMNEjisja(n):
a. import-exportjcompanyjthatjactivelyjtradesjinjforeignjmarkets.
b. companyjthatjpassivelyjmanagesjitsjsubstantialjforeignjdirectjinvestment.
c. import-exportjcompanyjthatjactivelyjmanagesjitsjforeignjinvestmentjportfolio.
d. companyjthatjactivelyjmanagesjsubstantialjforeignjdirectjinvestment.
ANS:dj(AjtruejMNEjisjajcompanyjthatjhasjsubstantialjdirectjinvestmentjinjforeignjcountries,jandjt
hatjactivelyjmanagesjandjregardsjitsjforeignjoperationsjasjintegraljpartsjofjthejcompany,jbothjstrat
egicallyjandjorganizationally.jCompaniesjthatjeitherjdojnotjholdjequityjpositionsjorjholdjminorje
quityjpositionsjinjoverseasjventuresjwithoutjorjwithjveryjlowjmanagement
involvementjmayjbejviewedjasj“international”jcompaniesjbutjwouldjnotjbejregardedjasjmultinatio
naljenterprises.)
Difficulty:jModeratej
Pg:j12
Subject:jMNEjdefinition
15. Threejprerequisitesjthatjmustjbejsatisfiedjbeforejajnationaljfirmjcanjtransformjitselfjintojajmult
inationaljfirmjinclude:
a. scale-basedjadvantages,jownership-specificjadvantages,jandjcontractualjcapabilities.
b. location-specificjadvantages,jownership-specificjadvantages,jandjorganizationaljcapabilities.
c. scale-basedjadvantages,jownership-specificjadvantages,jandjorganizationaljcapabilities.
d. location-specificjadvantages,jknowledgejadvantages,jandjorganizationaljcapabilities.
ANS:bj(a,jc,jandjdjarejincorrectjsincejscale-basedjadvantages,jknowledge-
basedjadvantages,jandjcontractualjcapabilitiesjare,jbyjthemselves,jinsufficientjtojjustifyjthejintern
ationalizationjofjoperations.jWithjmuchjlessjeffortjajcompanyjoftenjcanjselljorjlicensejitstechnolo
gyjtojforeignjproducers,jfranchisejitsjbrandjnamejinternationally,jorjselljitsjproductsjabroadjthroug
hjlocaljdistributors,jwithoutjhavingjtojsetjupjitsjownjoffshorejoperations.)jDifficulty:jModeratejtoj
hard
Pg:j22
Subject:jPrerequisitesjforjinternationalization
16. Whichjofjthejfollowingjcorrectlyjdescribesjthejsequentialjevolutionjinjmanagementjthinkingjwit
hjrespectjtojthejstrategicjrolejofjforeignjoperationsjinjemergingjMNEs?
a. globaljmentality,jmultinationaljmentality,jinternationaljmentality,jtransnationaljmentality.
b. internationaljmentality,jglobaljmentality,jtransnationaljmentality,jmultinationaljmentality.
c. multinationaljmentality,jglobaljmentality,jinternationaljmentality,jtransnationaljmentality.
d. internationaljmentality,jmultinationaljmentality,jglobaljmentality,jtransnationaljmentality.
ANS:dj(a,jb,jandjcjarejincorrectjsince,jalthoughjtheyjdescribejthejdifferentjwaysjofjmanagementjthink
ingjregardingjthejstrategicjrolejofjforeignjoperationsjinjemergingjMNEs,jtheydojnotjdescribejthejevol
utionjofjthisjthinkingjinjthejcorrectjsequence.)
4
ngjabroad:
Motivations,jmeans,jandjmentalities
True/False
1. ThejlargestjMNEsjarejequivalentjinjtheirjeconomicjimportancejtojlessjdevelopedjeconomiesjsuc
hjasjNigeria,jMoldova,jorjJamaica.
ANS:Falsej(SalesjofjthejlargestjMNEsjexceedjthejGDPsjofjlessjdevelopedjcountries.)jDifficulty:j
Moderate
Pg:j16jandjTablej1.3j(16)
Subject:jMNEjinfluencejinjthejglobaljeconomy
2. Thejprocessjofjinternationalizationjfollowedjbyjmostjfirmsjisjusuallyjwell-
thoughtjoutjinjadvancejandjtypicallyjbuildsjonjajcombinationjofjrationaljanalysis,jplanningja
ndjimplementation.
ANS:Falsej(Itjisjmorejlikelyjajcombinationjofjrationaljanalysis,jopportunism,jandjluck.jInjregards
jtojopportunism,jseveraljstudiesjhavejfoundjthatjmostjfirmsjbeginjexportingjduejtojanjunsolicitedj
exportjorder.)
Difficulty:jModeratej
Pg:j22-23
Subject:jThejProcessjofjInternationalization
3. Alljcompaniesjinternationalizejinjanjincrementaljmanner.jFirst,jtheyjmakejanjinitialjcommitm
entjofjresourcesjtojthejforeignjmarketjinjorderjtojsecurejlocaljmarketjknowledge.jBuildingjonjth
isjknowledge,jtheyjmakejsubsequentjresourcejcommitments,jeventuallyjleadingjtojhigherjleve
lsjofjinvestmentjinjthejforeignjmarket.
ANS:Falsej(Therejarejmanyjexceptionsjtojthejincrementaljapproach.jSomejfirmsjarej“bornjglobal
s”.jOtherjfirmsjretainjthejsamejmode,jincludingjleveljofjsubsidiaryjinvolvement,jinjalljforeignjmar
kets.)
Difficulty:jModeratej
Pg:j23
Subject:jThejProcessjofjInternationalization
4. Ajjointjventurejisjajcontractualjmodejofjforeignjentryjinvolvingjajhighjleveljofjresourcejcom
mitmentjbyjalljpartners.
ANS:Falsej(AjJVjwilljnotjtypicallyjrequirejasjhighjajresourcejcommitmentjasjwejwouldjseejinjwhol
lyjownedjsubsidiaries.jInjaddition,jtherejisjsignificantjvariabilityjinjthejleveljofjresourcesjcontribut
edjbyjpartners.)
1
,Difficulty:j ModeratejPg:
24j(Figurej1.2)jSubject:
Foreignjentryjmode
5. Emergingjmotivationsjforjinternationalizationjincludejthejdesirejtojenhancejthejfirm’sjco
mpetitivejpositionjandjthejdesirejtojdevelopjglobaljscanningjcapabilities.
ANS:TruejDiffi
culty:
ModeratePg:
19-20
Subject:jEmergingjMotivations
6. ForjanjMNEjtojexist,jfirstjforeignjcountriesjmustjprovidejlocation-
specificjadvantagesjtojattractjthejcompanyjtojinvestjthere,jsecondjthejcompanyjmustjhavejowner
ship-
specificjadvantagesjthatjcounteractjitsjliabilityjofjforeignness,jthirdjthejcompanyjmustjhavejthej
organizationaljcapabilityjtojleveragejitsjstrategicjadvantagesjmorejeffectivelyjinternallyjthanjext
ernally.
ANS:TruejDifficulty
:jModeratejPg:j22
Subject:jPrerequisitesjforjinternationalization
7. AnjMNEjwithjanj‘internationaljmentality’jwilljtypicallyjbejmanagedjasjajcoordinatedjfed
eration.
ANS:TruejDifficulty
:jModeratejPg:j26
Subject:jThejevolvingjmentality:jinternationaljtojtransnational
8. AnjMNEjwithjaj‘multinationaljmentality’jwilljtypicallyjbejmanagedjasjajcoordinatedjfed
eration.
ANS:Falsej(Itjwilljtypicallyjbejmanagedjasjajdecentralizedjfederation.)Difficulty:jModerate
Pg:j26-27
Subject:jThejevolvingjmentality:jinternationaljtojtransnational
9. AnjMNEjwithjaj‘globaljmentality’jwilljtypicallyjmanagejitsjoperationsjcentrally.
2
,ANS:TruejDifficulty
:jModeratejPg:j27
Subject:jThejevolvingjmentality:jinternationaljtojtransnational
10. AnjMNEjwithjaj‘transnationaljmentality’jwilljtypicallyjbejmanagedjasjanjintegratedjnetwork.
ANS:TruejDifficulty
:jModeratejPg:j27
Subject:jThejevolvingjmentality:jinternationaljtojtransnational
11. Thejcorejadvantagejmultinationaljmentalityjhasjoverjglobaljmentalityjisjmorejefficientjma
nufacturing.
ANS:Falsej(itjisjthejotherjwayjaround)Difficulty:
Moderatej
Pg:j26-27
Subject:jThejevolvingjmentality:jinternationaljtojtransnational
12. RaymondjVernon’sjarticlej“Gonejarejthejcashjcowsjofjyesteryear”jhighlightsjajcompany’sjglo
baljscanningjandjlearningjcapability.
ANS:TruejDiffi
culty:jHard
Pgj19j(footnotej10)
Subject:jEmergingjMotivations
13. Onlyjonejarticlejfurtherjdevelopsjthejideajthatj“thejprocessjofjdevelopingjthesejstrategicjandjorga
nizationaljattributesjliesjatjthejheartjofjthejinternationalizationjprocessjthroughjwhichjajcompan
yjbuildsjitsjpositionjinjworldjmarkets.
ANS:Falsej(2jarticlesjfurtherjdevelopjthejidea:jA.jJonssonjandjN.jJ.jFoss,j“Internationaljexpans
ionjthroughjflexiblejreplication:jlearningjfromjthejinternationalizationjexperiencejofjIKEA,”jJ
ournaljofjInternationaljBusinessjStudies,j42:9j(2011),
1079–
1102jandjJ.jW.jLujandjP.jW.jBeamish,j“Internationaljdiversificationjandjfirmj performance:jthejS-
curvejhypothesis,”jAcademyjofjManagementjJournal,j47:4j(2004),j598–609.)jDifficulty:jHard
Pg:j22-23j(footnotej15)
Subject:jProcessjofjInternationalization
3
, MultiplejChoice
14. AnjMNEjisja(n):
a. import-exportjcompanyjthatjactivelyjtradesjinjforeignjmarkets.
b. companyjthatjpassivelyjmanagesjitsjsubstantialjforeignjdirectjinvestment.
c. import-exportjcompanyjthatjactivelyjmanagesjitsjforeignjinvestmentjportfolio.
d. companyjthatjactivelyjmanagesjsubstantialjforeignjdirectjinvestment.
ANS:dj(AjtruejMNEjisjajcompanyjthatjhasjsubstantialjdirectjinvestmentjinjforeignjcountries,jandjt
hatjactivelyjmanagesjandjregardsjitsjforeignjoperationsjasjintegraljpartsjofjthejcompany,jbothjstrat
egicallyjandjorganizationally.jCompaniesjthatjeitherjdojnotjholdjequityjpositionsjorjholdjminorje
quityjpositionsjinjoverseasjventuresjwithoutjorjwithjveryjlowjmanagement
involvementjmayjbejviewedjasj“international”jcompaniesjbutjwouldjnotjbejregardedjasjmultinatio
naljenterprises.)
Difficulty:jModeratej
Pg:j12
Subject:jMNEjdefinition
15. Threejprerequisitesjthatjmustjbejsatisfiedjbeforejajnationaljfirmjcanjtransformjitselfjintojajmult
inationaljfirmjinclude:
a. scale-basedjadvantages,jownership-specificjadvantages,jandjcontractualjcapabilities.
b. location-specificjadvantages,jownership-specificjadvantages,jandjorganizationaljcapabilities.
c. scale-basedjadvantages,jownership-specificjadvantages,jandjorganizationaljcapabilities.
d. location-specificjadvantages,jknowledgejadvantages,jandjorganizationaljcapabilities.
ANS:bj(a,jc,jandjdjarejincorrectjsincejscale-basedjadvantages,jknowledge-
basedjadvantages,jandjcontractualjcapabilitiesjare,jbyjthemselves,jinsufficientjtojjustifyjthejintern
ationalizationjofjoperations.jWithjmuchjlessjeffortjajcompanyjoftenjcanjselljorjlicensejitstechnolo
gyjtojforeignjproducers,jfranchisejitsjbrandjnamejinternationally,jorjselljitsjproductsjabroadjthroug
hjlocaljdistributors,jwithoutjhavingjtojsetjupjitsjownjoffshorejoperations.)jDifficulty:jModeratejtoj
hard
Pg:j22
Subject:jPrerequisitesjforjinternationalization
16. Whichjofjthejfollowingjcorrectlyjdescribesjthejsequentialjevolutionjinjmanagementjthinkingjwit
hjrespectjtojthejstrategicjrolejofjforeignjoperationsjinjemergingjMNEs?
a. globaljmentality,jmultinationaljmentality,jinternationaljmentality,jtransnationaljmentality.
b. internationaljmentality,jglobaljmentality,jtransnationaljmentality,jmultinationaljmentality.
c. multinationaljmentality,jglobaljmentality,jinternationaljmentality,jtransnationaljmentality.
d. internationaljmentality,jmultinationaljmentality,jglobaljmentality,jtransnationaljmentality.
ANS:dj(a,jb,jandjcjarejincorrectjsince,jalthoughjtheyjdescribejthejdifferentjwaysjofjmanagementjthink
ingjregardingjthejstrategicjrolejofjforeignjoperationsjinjemergingjMNEs,jtheydojnotjdescribejthejevol
utionjofjthisjthinkingjinjthejcorrectjsequence.)
4
