Exam Flashcards

Question

What are institutional voids?

Answer 1

Absence of specialised intermediaries, regulatory systems and contract-enforcing mechanisms in emerging markets --> reduces efficiency of markets and raises transaction costs

Answer 2

Entry strategies for new emerging markets need to be designed very carefully considering local context, but also self-evaluate commitment level, entry mode and firm intent. There are high-context cultures (china, korea, arab) and low-context cultures (germany, canada).

Answer 3

The inherent disadvantage that foreign firms experience in host countries because of their non-native status --> caused by the differences in formal and informal institutions. There may be a country of origin effect concerning LOF such as discrimination. Foreignness can be an asset because governments may incentivise FDI or a certain country may have a good reputation

Answer 4

The extent of dissimilarity between host and home institutions - large distance means conflicting demands for external legitimacy and internal consistency.

Answer 5

Upgrading is to make better products, make them more efficiently, and/or move into more skilled and value-adding activities and to develop cross-border linkages between firms in global production and distribution systems. Four forms of upgrading: - process upgrading --> increase volume - product upgrading --> increase value - functional upgrading --> original equipment manufacturer --> own design manufacturer --> own brad manufacturer - chain (or inter-sectoral) upgrading obstacles: - key technologies/functions at the 1st tier in GVC tend to be dominated by large MNEs - MNEs often control and own lower tiers

Answer 6

accelerated internationalisation: - building an entrepreneurial team with international ecperience - learning from importing and inward foreign investors - learning from others operating the foreign country - acquiring resouces in the foreign country Born global firm: young entrepreneurial company that undertakes early and substantial internationalisation despite the scarce resources typical of most small business --> they tend to be: - SMEs - self-financed - high-tech firms Firms invest abroad without possessing substantial market knowledge if the perceived risk of investing abroad is lower than the perceived risk of not investing

Answer 7

- market attractiveness (buyer power, population size, potential market growth) - human resource factors (scale level, cheap labour) - infrastructure (supply chains, marketing channels) - profit retention factors - legal and regulatory environment - political system/governmental structure

Answer 8

First-mover advantages: - build up sales volume and gain technological leadership - capture demand by establishing a strong brand name and preempt rivals - relationship and connections with key stakeholders - create switching costs - establish entry barriers late-mover advantages: - opportunity to free-ride on first-mover investments - resolution of technological and market uncertainty - first-movers find it hard to adapt to market changes - pioneering costs: business system is so different from that of the home market that they need to devote considerable expense, time and effort to learn successful entry depends on: - timing of entry - speed - complexity related to inter-firm relationships and global value chains

Answer 9

A holistic framework to identify and evaluate the significance of factors influencing FDI. Main tenets: - the firm must have some strategic advantage to compete effectively with local firms in foreign countries - must select countries with favourable environments for investments - must have managerial ability to coordinate operations in foreign countries at a cost that is less than the benefot received O: ownership advantages that include knowledge, skills, capabilities, relationships, or physical assets that form the basis of the firms competitive advantage. L: leadership advantages arise from using resource endowments or assets that are tied to a particular location, and that the firm finds valuable to combine with its own unique assets (market size, demand, human capital, natural resources, industrial clusters) I: Internalisation advantages refer to advantages of hierarchical control derived from gaining the maximum economic rent from the O advantages (asset specificity, information asymmetri, dissemination risk) All three points are necessary for a succesfull FDI, you need O and I for export and you need O for contractual resource transfers

Answer 10

entry: - government screening of investment proposals - exclusions of foreign firms from certain sectors - restrictions on the degree of foreign ownership operations: - locational restrictions on foreign investment - requirements related to foreign firms' activities, exports and management finance: - restrictions on the remittance of profits abroad - level of taxing profits of foreign firms incentives: - direct encouragement of FDI

Answer 11

Sanctions are covered in GVC analysis. Positive sanctions: - long-term relationship - prime-supplier status negative sanctions: - fines lowering a purchase price, de-listing a supplier, compulsary closure --> loss of linkages

Answer 12

Legislative governance: - within a GVC: Setting standards for suppliers (on-time deliveries, product quality) - external actors: environmental standards, hygiene standards judicial governance: - within a GVC: monitoring suppliers' fulfillment of standards - external actors: monitoring conformance to ISO standards executive governance: - within a GVC: assisting suppliers to meet these standards - external actors: business associations, industrial policy

Answer 13

advantages: - export: ability to realise scale economies, low risk - license/franchise: low development costs and risks, low entry barriers - joint venture: access to local partners' knowledge, sharing costs and risk - greenfield: protection of technology, ability to engage in global strategic coordination - acquisition: quick execution, obtain established brand, reduce competition disadvantages: - export: transportation costs, trade barriers, low control, lack of learning - license/franchise: lack of control over technology/quality, no global strategic coordination, protection of IPR issues, creating competition from licensee - joint venture: limited control over technology, divergent goals and interests, difficulty to coordinate globally - greenfield: high costs and high risk, time consuming, lack of initial knowledge acquisition: potential overpayment, culture clash between firms, political sensitivity

Answer 14

- conceptual ambiguity of L from O - theoretical redundancey of O because of similarity to I - unable to explain process of change of international production - the OLI framework may not be applicable to small/family businesses and firms from emerging markets

Answer 15

TCA argues that the boundaries of the firm is a result of the trade off between the cost associated with the use of the market and the cost associated with an additional layer of hierarchy

Exam Flashcards

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