Like this study set? Create a free account to save it.

Sign up for an account

Already have a Quizlet account? .

Create an account

International Business Terms

absolute advantage

A country has an _______________ in the production of a product when it is more efficient than any other country at producing it.

accounting standards

Rules for preparing financial statements.

ad valorem tariff

A tariff levied as a proportion of the value of an imported good.

administrative trade policies

These are typically adopted by government bureaucracies, that can be used to restrict imports or boost exports.

Andean Pact

A 1969 agreement between Bolivia, Chile, Ecuador, Colombia, and Peru to establish a customs union.

antidumping policies

Designed to punish foreign firms that engage in dumping and thus protect domestic producers from unfair foreign competition.

antidumping regulations

______________ are designed to restrict the sale of goods for less than their fair market price.


The purchase of securities in one market for immediate resale in another to profit from a price discrepancy.

Asia-Pacific Economic Cooperation (APEC)

Made up of 21 member states whose goal is to increase multilateral cooperation in view of the economic rise of the Pacific nations.

ASEAN(Association of South East Asian Nations)

Formed in 1967, an attempt to establish a free trade area between Brunei, Indonesia, Malaysia, the Philippines, Singapore, and Thailand.

auditing standards

Rules for performing an audit.

backward vertical FDI

Investing in an industry abroad that provides inputs for a firm's domestic processes.

balance-of-payments accounts

National accounts that track both payments to and receipts from foreigners.

balance-of-trade equilibrium

Reached when the income a nation's residents earn from exports equals money paid for imports.

bandwagon effect

When traders move like a herd, all in the same direction and at the same time, in response to each others' perceived actions.

banking crisis

A loss of confidence in the banking system that leads to a run on banks, as individuals and companies withdraw their deposits.

barriers to entry

Factors that make it difficult or costly for firms to enter an industry or market.


The direct exchange of goods or services between two parties without a cash transaction.

basic research centers

These are located in regions where valuable scientific knowledge is being created; they develop the basic technologies that become new products.

bilateral netting

Settlement in which the amount one subsidiary owes another can be canceled by the debt the second subsidiary owes the first.

bill of exchange

An order written by an exporter instructing an importer, or an importer's agent, to pay a specified amount of money at a specified time.

bill of lading

A document issued to an exporter by a common carrier transporting merchandise. It serves as a receipt, a contract, and a document of title.

Bretton Woods

A 1944 conference in which representatives of 40 countries met to design a new international monetary system.

bureaucratic controls

Achieving control through establishment of a system of rules and procedures.

business ethics

The accepted principles of right or wrong governing the conduct of businesspeople.


Agreement to accept percentage of a plant's output as payment for contract to build a plant.

capital account

In the balance of payments, records transactions involving the purchase or sale of assets.

capital controls

Restrictions on cross-border capital flows that segment different stock markets; limit amount of a firm's stock a foreigner can own; and limit a citizen's ability to invest outside the country.

capital flight

Residents convert domestic currency into a foreign currency.

Caribbean Single Market and Economy (CSME)

Unites six CARICOM members in agreeing to lower trade barriers and harmonize macroeconomic and monetary policies.


An association of English-speaking Caribbean states that are attempting to establish a customs union.

caste system

A system of social stratification in which social position is determined by the family into which a person is born, and change in that position is usually not possible during an individual's lifetime.

Central America Free Trade Agreement (CAFTA)

The agreement of the member states of the Central American Common Market joined by the Dominican Republic to trade freely with the United States.

Central American Common Market

A trade pact between Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua, which began in the early 1960s but collapsed in 1969 due to war.

centralized depository

The practice of centralizing corporate cash balances in a single depository.

channel length

The number of intermediaries that a product has to go through before it reaches the final consumer.

channel quality

The expertise, competencies, and skills of established retailers in a nation, and their ability to sell and support the products of international businesses.

civil law system

A system of law based on a very detailed set of written laws and codes.

class consciousness

A tendency for individuals to perceive themselves in terms of their class background.

class system

A system of social stratification in which social status is determined by the family into which a person is born and by subsequent socioeconomic achievements. Mobility between classes is possible.

code of ethics

A formal statement of the ethical priorities of a business or organization.


An emphasis on collective goals as opposed to individual goals.


Now-defunct economic association of Eastern European Communist states headed by the former Soviet Union.

command economy

An economic system where the allocation of resources, including determination of what goods and services should be produced, and in what quantity, is planned by the government.

common law system

A system of law based on tradition, precedent, and custom. When law courts interpret common law, they do so with regard to these characteristics.

common market

A group of countries committed to (1) removing all barriers to the free flow of goods, services, and factors of production between each other and (2) the pursuit of a common external trade policy.

communist totalitarianism

A version of collectivism advocating that socialism can be achieved only through a totalitarian dictatorship.


Those who believe socialism can be achieved only through revolution and totalitarian dictatorship.

comparative advantage

The theory that countries should specialize in the production of goods and services they can produce most efficiently. A country is said to have a comparative advantage in the production of such goods and services.

competition policy

Regulations designed to promote competition and restrict monopoly practices.

Confucian dynamism

Theory that Confucian teachings affect attitudes toward time, persistence, ordering by status, protection of face, respect for tradition, and reciprocation of gifts and favors.

constant returns to specialization

The units of resources required to produce a good are assumed to remain constant no matter where one is on a country's production possibility frontier.


Document that specifies conditions of an exchange and details rights and obligations of involved parties.

contract law

Body of law that governs contract enforcement.

control systems

Metrics used to measure performance of subunits.

controlling interest

A firm has a controlling interest in another business entity when it owns more than 50 percent of that entity's voting stock.


The metrics used to measure the performance of subunits and make judgments about how well managers are running those subunits.

Convention on Combating Bribery of Foreign Public Officials in International Business Transactions

OECD agreement to make the bribery of foreign public officials a criminal offense.


Exclusive legal rights of authors, composers, playwrights, artists, and publishers to publish and dispose of their work as they see fit.

core competence

Firm skills that competitors cannot easily match or imitate.

corporate culture

The organization's norms and value systems.

cost of capital

Price of money.

Council of the European Union

Represents the interests of EU members and has authority to approve EU laws.


A reciprocal buying agreement.


The trade of goods and services for other goods and services.

countervailing duties

Antidumping duties.

Court of Justice

Supreme appeals court for EU law.

cross-cultural literacy

Understanding how the culture of a country affects the way business is practiced.

cross-licensing agreement

An arrangement in which a company ________ valuable intangible property to a foreign partner and receives a _________ for the partner's valuable knowledge; reduces risk of _________.

cultural controls

Achieving control by persuading subordinates to identify with the norms and value systems of the organization (self-control).

cultural relativism

Belief that ethics are culturally determined, and a firm should adopt the ethics of the culture in which it is operating.


The complex whole that includes knowledge, belief, art, morals, law, custom, and other capabilities acquired by a person as a member of society.

currency board

Means of controlling a country's currency.

currency crisis

Occurs when a speculative attack on the exchange value of a currency results in a sharp depreciation in the value of the currency or forces authorities to expend large volumes of international currency reserves and sharply increase interest rates to defend the prevailing exchange rate.

currency speculation

Involves short-term movement of funds from one currency to another in hopes of profiting from shifts in exchange rates.

currency swap

Simultaneous purchase and sale of a given amount of foreign exchange for two different value dates.

currency translation

Converting the financial statements of foreign subsidiaries into the currency of the home country.

current account

In the balance of payments, records transactions involving the export or import of goods and services.

current account deficit

The current account of the balance of payments is in deficit when a country imports more goods and services than it exports.

current account surplus

The current account of the balance of payments is in surplus when a country exports more goods and services than it imports.

current cost accounting

Method that adjusts all items in a financial statement to factor out the effects of inflation.

current rate method

Using the exchange rate at the balance sheet date to translate the financial statements of a foreign subsidiary into the home currency.

customs union

A group of countries committed to (1) removing all barriers to the free flow of goods and services between each other and (2) the pursuit of a common external trade policy.

D'Amato Act

Act passed in 1996, similar to the Helms-Burton Act, aimed at Libya and Iran.

debt loan

Requires a corporation to repay loan at regular intervals.

deferral principle

Parent companies are not taxed on the income of a foreign subsidiary until they actually receive a dividend from that subsidiary.


Political system in which government is by the people, exercised either directly or through elected representatives.


Removal of government restrictions concerning the conduct of a business.

diminishing returns to specialization

Applied to international trade theory, the more of a good that a country produces, the greater the units of resources required to produce each additional item.

dirty-float system

A system under which a country's currency is nominally allowed to float freely against other currencies, but in which the government will intervene, buying and selling currency, if it believes that the currency has deviated too far from its fair value.


An order written by an exporter telling an importer what and when to pay.


The party to whom a bill of lading is presented.


Selling goods in a foreign market for less than their cost of production or below their 'fair' market value.

eclectic paradigm

Argument that combining location-specific assets or resource endowments and the firm's own unique assets often requires FDI; it requires the firm to establish production facilities where those foreign assets or resource endowments are located.


Conducting business online through the Internet.

economic exposure

The extent to which a firm's future international earning power is affected by changes in exchange rates.

economic risk

The likelihood that events, including economic mismanagement, will cause drastic changes in a country's business environment that adversely affect the profit and other goals of a particular business enterprise.

economic union

A group of countries committed to (1) removing all barriers to the free flow of goods, services, and factors of production between each other, (2) the adoption of a common currency, (3) the harmonization of tax rates, and (4) the pursuit of a common external trade policy.

economies of scale

Cost advantages associated with large-scale production.

efficient market

A market where prices reflect all available information.

ending rate

The spot exchange rate when budget and performance are being compared.

equity loan

Occurs when a corporation sells stock to an investor.

ethical dilemma

Situation in which no available alternative seems ethically acceptable.

ethical strategy

A course of action that does not violate business ethics.

ethical systems

Cultural beliefs about what is proper behavior and conduct.

ethics officer

An individual hired by a company to be responsible for making sure that all employees are trained to be ethically aware, that ethical considerations enter the decision-making process, and that employees follow the company's code of ethics.

ethnocentric behavior

Behavior that is based on the belief in the superiority of one's own ethnic group or culture; often shows disregard or contempt for the culture of other countries.

ethnocentric staffing

A staffing approach within the MNE in which all key management positions are filled by parent-country nationals.


Belief in the superiority of one's own ethnic group or culture.


A bond placed in countries other than the one in whose currency the bond is denominated.


Any currency banked outside its country of origin.


Dollar banked outside the United States.

European Commission

Responsible for proposing EU legislation, implementing it, and monitoring compliance.

European Council

Consists of the heads of state of EU members and the president of the European Commission.

European Free Trade Association (EFTA)

A free trade association including Norway, Iceland, and Switzerland.

European Monetary System (EMS)

EU system designed to create a zone of monetary stability in Europe, control inflation, and coordinate exchange rate policies of EU countries.

European Parliament

Elected EU body that provides consultation on issues proposed by European Commission.

European Union (EU)

An economic group of 15 European nations: Austria, Belgium, Denmark, Finland, France, Germany, Great Britain, Greece, the Netherlands, Ireland, Italy, Luxembourg, Portugal, Spain, and Sweden. Established as a customs union, it is now moving toward economic union. (Formerly the European Community.)

exchange rate

The rate at which one currency is converted into another.

exchange rate mechanism (ERM)

Mechanism for aligning the exchange rates of EU currencies against each other.

exclusive channel

A distribution channel that outsiders find difficult to access.


A citizen of one country working in another country.

expatriate failure

The premature return of an expatriate manager to the home country.

expatriate manager

A national of one country appointed to a management position in another country.

experience curve

Systematic production cost reductions that occur over the life of a product.

experience curve pricing

Aggressive pricing designed to increase volume and help the firm realize experience curve economies.

export management company

Export specialists who act as an export marketing department for client firms.

Export-Import Bank (Eximbank)

Agency of the U.S. government whose mission is to provide aid in financing and facilitate exports and imports.


Sale of products produced in one country to residents of another country.

external stakeholders

All other individuals and groups, other than internal stakeholders, that have some claim on the business.


Knowledge spillovers.

externally convertible currency

Nonresidents can convert their holdings of domestic currency into foreign currency, but the ability of residents to convert the currency is limited in some way.

factor endowments

A country's endowment with resources such as land, labor, and capital.

factors of production

Inputs into the productive process of a firm, including labor, management, land, capital, and technological know-how.

Financial Accounting Standards Board (FASB)

The body that writes the generally accepted accounting principles by which the financial statements of U.S. firms must be prepared.

financial structure

Mix of debt and equity used to finance a business.

first-mover advantages

Advantages accruing to the first to enter a market.

first-mover disadvantages

Disadvantages associated with entering a foreign market before other international businesses.

Fisher Effect

Nominal interest rates (i) in each country equal the required real rate of interest (r) and the expected rate of inflation over the period of time for which the funds are to be lent (I). That is, i = r + I.

fixed exchange rates

A system under which the exchange rate for converting one currency into another is fixed.

fixed-rate bond

Offers a fixed set of cash payoffs each year until maturity, when the investor also receives the face value of the bond in cash.

flexible machine cells

Flexible manufacturing technology in which a grouping of various machine types, a common materials handler, and a centralized cell controller produce a family of products.

flexible manufacturing technologies

Manufacturing technologies designed to improve job scheduling, reduce setup time, and improve quality control.

floating exchange rates

A system under which the exchange rate for converting one currency into another is continuously adjusted depending on the laws of supply and demand.

flow of foreign direct investment

The amount of foreign direct investment undertaken over a given time period (normally one year).


Routine conventions of everyday life.

foreign bonds

Bonds sold outside the borrower's country and denominated in the currency of the country in which they are issued.

Foreign Corrupt Practices Act

U.S. law regulating behavior regarding the conduct of international business in the taking of bribes and other unethical actions.

foreign debt crisis

Situation in which a country cannot service its foreign debt obligations, whether private-sector or government debt.

See more

Please allow access to your computer’s microphone to use Voice Recording.

Having trouble? Click here for help.

We can’t access your microphone!

Click the icon above to update your browser permissions and try again


Reload the page to try again!


Press Cmd-0 to reset your zoom

Press Ctrl-0 to reset your zoom

It looks like your browser might be zoomed in or out. Your browser needs to be zoomed to a normal size to record audio.

Please upgrade Flash or install Chrome
to use Voice Recording.

For more help, see our troubleshooting page.

Your microphone is muted

For help fixing this issue, see this FAQ.

Star this term

You can study starred terms together

Voice Recording