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INB Test 2

Terms in this set (28)

Strategic behavior in oligopolistic industries
theory based on the idea that FDI flows are a reflection of strategic rivalry between firms in the global maketplace. F.T. Knickerbocker that FDI may be a result of imitative behavior in an oligopoly
oligopoly
industry composed of a limited number of large firms(e.g. US cell phones providers)
multipoint competition
when two or more enterprises encounter each other in different regional markets, national markets, or industries
eclectic paradigm
attempts to combine the other two perspective into a single holistic expansion of FDI. Dunning argues that in addition to the various factors discussed above location-specific advantages and externalities are also of considerable importance in explaining both the rationale for and the direction of foreign direct investment
location-specific advantages
arise from using resource endowments or assists that are tied to a particular location and that a firm finds valuable to combine with its own unique assets
externalities
knowledge spillovers that occur when companies in the same industry locate in the same area (e.g. high tech FDI in silicon valley, automotive FDI in southeast KY/TN/SC/AL/MS)
product life cycle
Raymond Vernon's theory that is also used to explain FDI. Vernon argued that often the same firms that pioneer a product in their home markets may undertake FDI to produce a product for consumption in foreign markets
balance-of-payments accounts
a record of a country's payments to and receipts from other countries
current account
the current account is a record of a country's export and import of goods and services
offshore production
FDI undertaken to serve the home market
radical view towards FDI
MNE are tools for exporting host countries to the exclusive benefit of capitalists/imperialists home countries
free market veiw towards FDI
argues that international production should be distributed among countries according to the theory of comparative advantage. within this framework, FDI is an instrument used by MNE's for dispersing the production of goods and services to the most efficient locations around the globe
pragmatic nationalism view towards FDI
ideology between the two above extremes. view is that FDI has both benefits and costs. should be allowed only if the benefits outweigh the costs
Foreign direct investment
a direct investment in business investment operations in a foreign country. occurs when a firm invests directly in new facilities to produce and/or market in a foreign country. once a firm undertakes FDI it becomes a multinational enterprise
Greenfield investment (v. merger/acquisition)
involves the establishment of a wholly new operation ina foreign country (versus merging with an existing firm in the foreign country)
flow of FDI
the amount of FDI undertaken over a given time period (normally a year) viewed in terms of outflow and inflow
outflow of FDI
the flow of FDI out of a country
inflow of FDI
the flow of FDI into a country
stock of FDI
the total accumulated value of foriegn-owned assets at a given time
gross fixed capital formation
summarizes the total amount of capitol invested in factories, stores, office buidlings
Free trade
absence of government barriers to the free flow of goods and services between countries. Refers to a situation where a government does not attempt to influence through quotas or duties what its citizens can buy from another country or what they can produce and sell to another country
mercantilism
a 16th century English economic philosophy advocating that countries should simultaneously encourage exports and discourage imports. its a principle assertion was the it is in a countries best interest to maintain a trade surplus, to export more than it imports. consistent with this belif the mercantilism doctrine advocated government intervention to achieve a surplus in the balance of trade
zero-sum game
a situation in which an economic gain by one country results in a loss by another. it was left to adam smoth and david ricardo to show the shortsightedness of this approach and to demonstrate that trade is a positive-sum game. as an economic philosophy, mercantilism is problematic and not valid
absolute advantage
when in the production of a product when it is more efficient than any other country in producing it. smith says that countries should specialize in the production of goods for which they have an absolute advantage and then trade these goods for the goods produced by other countires
comparative advantage
it makes sense for a country to specialize in the production of those goods that it produces mot efficiently and to buy the goods that it produces less efficient;y from other countries that it could produce more efficiently than itself
constant return 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
heckscher-ohin
argued that comparative advantage arises from differences in national factor endowments and as a result this theory predicts that countries will export goods that make intensive use of those factors that are locally abundant while importing goods that make intensive use of factors that are locally scarce
leontif paradox
in 1953 postulated that since the US was relatively abundant in capital compared to other nations, theUS would be an exporter capital intensive goods and an importer of labor intensive goods. he found that US exports were less capital intensive than us imports
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