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TIB
Theories of international business
| Question | Answer |
|---|---|
| Name 3 country level analyses | 1. Trade theories and international economics 2. Product Life-cycle theory 3. Foreign direct Investment |
| Name 4 firm level analyses | 1. Regional and global Integration processes by Rugman et al (2011) 2. Monopolistic advantages and imperfect final markets (Rugman et al., 2011) 3. Internalization theory and imperfect intermediate markets (Rugman + Buckley & Casson) 4. OLI paradigm |
| Describe the Uppsala model | The process of internalization is path-dependent. First, you gain experience in those countries that are geographically, institutionally and culturally close to you. After this, you will expand to countries which are further away. |
| Name 4 subsidiary-level analyses | 1. MNEs as networks 2. LB FSA & NLB FSA 3. RBV 4. IBV |
| Describe Peng's institutional framework | The set of fundamental political, social and legal ground rules that establishes the basis for production, exchange and distribution. |
| What causes instutions to be weak or strong? Name 5. | Bribery, currency exchange risks, protection of intellecual property rights, incentive structures and sanctions. |
| Define institutions | The rules of the game. Shape individual and firm behavior. Institutions will reduce uncertainty for different actors by conditioning the ruling norms and behavior and define the boundaries of what is legitimate. |
| Define globalization according to Garett | the international integration of markets in goods, services and capital; most recently driven by the uniqueness of contemportary market integration |
| Name the three processes of economic integration | 1. International trade 2. FDI 3. International financial |
| Name 2 measurements of globalization | 1. International economic flows; economic size/ growth, international trade flows, FDI flows and international portfolio investment flows 2. foreign economic policy: tarrifs and non-tarrif barriers, FPI and capital FDI |
| Name the 3 drivers of globalization according to Garett | Technological innovation, growing international economic activity, liberalisation of foreign economic policies |
| Briefly name the 4 views on globalization by Garett | 1. Nothing new, return to the previous normal. 2. Technological determinism (strong): 3. technological determinism (weak) 4. Political idealogical change |
| Define the strong form of technological determinism | shrinkage in time and space, nothing the government can do |
| Define the weak form of technological determinism | Technology is influential, but the government could have a say. According to the Washington consensus however, they should not try to regulate. Needs to create a liberal, open economy in which technology can go international and not try to intervene. |
| Define the political ideological change construct argument | if MNEs create value for a country, governments should execute policies that are beneficial for the MNE. Benefit the businessmen in order to stimulate the required performance |
| Name some pro's of globalization | growth of free trade, global economic growth, job creation, reduced prices, infusion of capital and tech to poor countries, merging politics, influx of info, speedy travel and internet |
| Name some cons of globalization | income disparities within and across countries, remaining barriers, tax havens, social injustice |
| What is antiglobalization? | Like Brexit, going back to separate entities instead of the triad region network |
| What is a non-equity entry mode? | arms-length agreement with no investment into a joint company and hence less in cost and commitment, but possibility to learn |
| What is an equity entry mode? | Managerial control through ownership; high investment and commitment, but possibilities for internalization. |
| Name the two subcategories of Nonequity entry modes and their own subs | Exports: direct exports, indirect exports, others Contractual agreements: licensing, fanchising, turnkey projects, R&D contracts, Co-marketing |
| Name the two subcategories of equity entry modes and their own subs | Joint ventures: minority, 50/50. majority WOS: green-fields, aquisitions and others |
| What are strategic alliances? | Joint-ventures and contractual agreements. Agreements between two or more companies from different countries to collaborate in various business aspects |
| Name an advantage of strategic alliances | Shared investment and risk, reduced costs, exploitation of complementary skills and assets, establishing technological standards |
| Name a disadvantage of strategic alliances | unequal distribution of power, cultural distances, knowledge spill overs, opportunistic behaviours |
| Name an advantage of Franchising | few development costs and risks of doing business abroad, capitalise on market opportunities and non-core capabilities, avoiding tariffs and transportation costs with more control |
| Name a disadvantage of Licensing | high potential for loss of know-how (leaking information to potential competition), potential conflicts with licensee |
| Name an advantage of Licensing | few development costs and risks of doing business abroad, capitalise on market opportunities and non-core capabilities, avoiding tariffs and transportation costs |
| Name a disadvantage of Franchising | bad reputation of one franchising location can influence the image of the whole brand |
| What are greenfields? | Establishment of a wholly owned subsidiary from the ground up. |
| What is an acquisition? | Purchasing an already existing business in the foreign country. |
| What is a JV? | Partnership of two separate companies that always results in a new entity. |
| Name a disadvantage of Greenfields. | high risk of failure, slow to establish, considerable knowledge of host country |
| Name an advantage of Greenfields. | exploitation of firm’s advantages, replication of firm’ organisation and business model, no integration issues or risks |
| Name an advantage of Acquisitions. | quick to execute, less risky than Greenfield investments, possibility to leverage existing assets, resources and local market knowledge, synergies with the target company |
| Name a disadvantage of Acquisitions. | high risk of failure, lack of strategic fit, cultural clashes and post-acquisition integration, overestimation of target assets |
| Name a disadvantage of WOS. | firms bear the full costs and risks of setting up overseas operations, legitimacy problems, no bridge with host country |
| Name an advantage of WOS. | reduce risk of losing control of core competencies, allow for tight control over operations in different countries (coordination), replication or redeployment of firms’ business models and resources, no integration costs with local partners |
| Name 3 aspects one needs to consider when choosing between the different entry modes. | 1. gradual involvement in the internationalisation process (Uppsala idea) 2 .Transaction costs and level of commitment 3. Location specific factors and access to those |
| According to Hutzschenreuter, what is influenced by distance? | market selection, knowlegde transfer and inter-organizational relationships, performance and entry mode. |
| Name 3 ways to reduce the LOF. | 1. transferring FSA from HQ to the subsidiary 2. Isomorphic strategies 3. Host-country experiences |
| Name 5 distance measurements according to Hutzschenreuter et al . | 1. Geographic, institutional, economic, cultural and multi-dimensional |
| Name the 5 dimensions of individual distance by Hofstede. | 1. individualism vs collectivism 2. Power distance 3. Uncertainty avoidance 4. masculinity vs. feminity 5. Long-term orientation |
| Where does CAGE stand for? | Measures distance as a gap between countries due to: 1. cultural distance 2. administrative distance 3. geographic distance 4. economic distance |
| What is the main critique on the CAGE framework? | macro-level distance does not always hold for all firms; cooperative entry modes are not discussed (such as JV or alliance) and how they help to reduce distance; CAGE dimensions are not mutually exclusive |
| What is cultural distance according to the CAGE framework? | no colonial ties, no shared monetary or political association, no common currency or political unions, political hostility or government policies such as barriers to trade (tariffs and taxes), institutional strength and no preferential trade agreement |
| What is geographic distance according to the CAGE framework? | physical remoteness, lack of common borders, lack of sea or river access, weak transportation and communication links, differences in time and climates |
| What is economic distance according to the CAGE framework? | differences in consumer incomes as well as differences in cost and quality of natural, financial and human resources, infrastructure, intermediate inputs, information and knowledge |
| What is the use of the CSA/FSA matrix? | Helps explain the scope and direction of IB activities incorpoting the three units of analysis |
| What is internalization accroding to Bucley and Casson? | the integration of another product in/output in to the own corporate structure. Two types: operational and knowledge. |
| What are the coasian transaction cost economies? | Coordination costs of monotoring, controlling and managing transactions needs to be seen apart from the production costs. Cost is the primary determinant of the choice between outsourcing and internalization through FDI. |
| What are the traditional investment motives? Which modern investment motives are added by Dunning (2000)? | 1. Market-seeking 2. Resource seeking 3. efficiency seeking added: SAS, catch-up, R&D springboard |
| According to Dunning (2000), what are the demands of a successful paradigm? | 1. the sum of the values is greater than the whole 2. the strength also depends on the extent to which it can offer generic hypotheses 3. a paradigm is robust if it continues to address relevant problems |
| What is alliance capitalism according to Dunning (2000)? | The idea that firms need to work together and transfer skills and intellectual capital in order to find the synergy that firms need to develop. |
| What is the core of the article by Dunning (2000)? | Extension of thoughts on the Eclectic Paradigm (OLI, see left) and its relevance today as a tool to evaluate the extent and patterns of foreign value-added activities in light of globalisation, knowledgeintensive and alliance-based market economies |
| According to Peng (2001), what is the basis for the superiority of MNEs resources and their recombination? | a. subsidiaries manadate (competence creation vs exploitation b. upstream capabilities, like RD or sourcing c. downstream capabilities (marketing) |
| What is the core of Peng's 2001 article? | It's an illustration of the diffusion of RBV into IB theories and a framework for IB research |
| What is the core of Peng's 2002 article? | It's an attempt to establish a framework that explains stragetic choices in IB; IBV is the foundation. |
| According to Peng (2002), what are the different dependents for either diversification strategies and growth strategies? | Diversification strategies; credible legal frameworks, political stability and functioning factor markets. Growth strategies: generic expansion, M&A, networks and alliances. |
| What's the core of the article by Buckley and Casson from 2009? | It's an introduction to the internalization theory, in regard to MNEs and Coasian TCE and a review of how the theory has emerged through recent decades. |
| What's the core of the article by Rugman, Verbeke & Nguyen (2011)? | A conceptual disentanglement of 50 years of IB theory using 3 units of analysis (country, firm , subisidiary) and an introduction to the CSA/FSA matrix and evaluation on whether it will continue to be successful. |
| Name the two conditions by Hymer for the existence of FDI. | 1. MNEs must possess a countervailing advantage over the local firm. 2. the market for selling this advantage must be imperfect. |
| What are the 4 conditions for vertical integration to be successful? | 1. the transaction is frequent enough 2. there are only a few buyers and sellers 3. high investments are involved 4. upstream and downstream activities are technicaly dependent on each other and require close coordination. |
| Name the 2 subcategories of O advantages. | 1. asset advantages. 2. transactional advantages |
| What is the benefit of having strong O advantages? | Overcome LOF. |
| What is a Location advantage? | an advantage of a specific country (CSA), such as natural resources, demand conditions or institutional factors. |
| What is an I advantage? | the benefits of creating, transferring, deploying, recombining and exploiting FSAs internally. |
| What is the core of Garett's (2000) article? | A conceptualization of the causes of globalization in terms of 4 big picture views and the respective role of the government in each. |
| What is the core of Ghemawat's 2003 article? | Response to other authors. The world is not flat; the world is not even near being fully globalized--> semi-globalization |
| What is aggregation? | taking advantage of locational resources to increase returns by performing roughly the same activity in different countries; creating economies of scales through standardisation |
| What is arbitrage? | taking advantage of international differences by geographically separating activities in an integrated vertical chain and variations in absolute costs or willingness-to-pay |
| What is the main implication related to location from Ghemawat's article? | A semi-globalized world offers opportunities to exploit differences in location/CSA. |
| In what way is the article by Rugman & Verbeke (2004) supportive of that of Ghemawat? | It agrees on the fact that the world is not fully globalized and looks into the numbers. From this it was derived that the majority of the MNEs were home-region oriented. |
| What is LORF? | The liability of region foreigness. Relates to the fact that countries outside an MNEs region (like the EU) cause increased constraints due to a lack of synergies. |
| What is the core of Dunning's (1998) article? | An extension on the OLI model in the way that it elaborates on the investment motives. Also analyses global business context trends and their implications. |
| What are the 3 trends as observed by Dunning (1998) relating to global business context? | 1. emergence of intellectual capital (property rights) as the key wealth creating asset 2. increasing integration of economic activity due to decreasing barriers. 3. increasing emphasis on alliance capitalism both intra and inter firm |
| What are the 2 reinforcing factors of the 3 trends in global business context according to Dunning (1998)? | 1. technological change 2. renaissance of the market economy |
| What is added by Dunning (1998) relating to the natural resource seeking motive? | There are additional local opportunities for upgrading the quality of your resources, their processing and their transportation. There is a large availability of local partners for knowledge and or capital intensive resource exploitation. |
| What is added by Dunning (1998) relating to the market seeking motive? | large growing regional markets (NAFTA, EU), presence and competitiveness of related key suppliers, quality of national and local infrastructure, increased agglomeration economies and local service supports, need of knowledge intensive firms |
| What is added by Dunning (1998) relating to the efficiency seeking motive? | further emphasis on skilled labour, competitively related firms, infrastructure and institutions, closeness to users and R&D activities; increased role for host government to restructure economies and remove impediments for human resource upgrading |
| What is added by Dunning (1998) relating to the SAS motive? | ncreased geographical dispersion of knowledge; price and availability of synergised assets to foreign firms; opportunities for exchange of localised tacit knowledge, ideas and learning; access to different cultures, institutions and systems |
| What is the core of the article by Brouthers & Hennart (2007) | A ‘menu of choices’ a manager is faced with when entering a foreign market; a review of entry modes, its weaknesses and shortcomings as well as suggestions on how to optimise company borders when doing FDI |
| In what ways is market entry selection a multi-level phenomenon? | One needs to understand both the firm-level effects and the industry-level effects |
| What is the core of the article by Gao, Kotabe & Lu (2010)? | Integration of industry-based, resource-based and institution-based views into a Strategy Tripod to investigate the determinants of export propensity and export intensity |
| What is the main takeaway derived from Gao, Kotabe & Lu (2010) with regards to firm competencies? | Firm competencies have differential effects on export behavior. If you don't have them and operate on a cost leadership base, you will not benefit from export. |
| What is the core of the articly by Pan & Tse (2000)? | ntroduction of a Hierarchical Model of Entry Modes; categorisation of equity (JV, WOS) and non-equity (contractual agreement, export) modes |
| What is the core of the article by Hutzschenreuter et al. (2016)? | Clarification on the concept of distance by answering four questions related to its definition, nature, importance and effects |
| According to Hutzschenreuter et al., why does distance matter? | Matters as it increases the friction and challenges of achieving and sustaining cross-border economic activity; complexity and management costs increase with distance. |
| What is the psychic distance paradox? | distance can be beneficial in terms of decision-making due to encouragement of learning and adopting new routines |
| What is the core of the article by Moon, Rugman & Verbeke (1998)? | Extension to Porters Single Diamond approach into a Double Diamond approach; theoretical sample of Korea and Singapore that contradict Porters original arguments |
| What are the main differences between the SDA and the DDA? | - domestic value added includes both domestic and foreign firms - FSA and LA may span many countries and be complementary |
| What is the role of the MNE in the DDA? | it creates links between separate national diamonds through activities in those countries which leads to SCA in many industries. |
| What is the difference in terms of Singapore with the SDA and the DDA? | DDA recognizes that there is inward FDI in terms of capital and technology and outward FDI in terms of natural resources and cheap labour, which impact Singapore's current competitiveness. |
| What is the difference in terms of Korea with the SDA and the DDA? | DDA recognises inward FDI (advanced technology) and outward FDI (cheap labour) as contributors to SKs current competitiveness |
| What is the core of Porter's SDA? | looks at why certain markets are more attractive than others; looks not at how national prosperity is inherited but created |
| What are the 4 factors that determine the national competitive advantage and 2 outside factors according to the SDA? | 4 factors: 1. firm's strategy, structure and rivalry 2. demand condition of consumers 3. factor conditions/endowments 4. related and supporting industries 2 outside factors: 1. role of the government 2. luck |
| What 4 functions should the government fulfill according to Porter's SDA? | Catalyst, challenger, transmitter and amplifier of the diamond attributes. |
| What is the core of Hofstede's 1994 article? | Identifies national cultures on 5 dimensions and organizational cultures on 6 quantifiable dimensions |
| What are Hofstede's 6 quantifiable dimensions of organizational cultures? | 1. job vs employee orientation 2. professional vs parochial 3. open vs closed systems 4. process vs. result orientation 5. tightly vs loosely controlled enviornments 6. pragmatic vs normative |
Created by:
Suzanne1998
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