CRITICALDISCUSSIONQUESTIONSANDANSWERS.doc

PAGE  PAGE 3 International Business Huang Huiping PAGE  5-PAGE 3 CRITICAL DISCUSSION QUESTIONS AND ANSWERS 课后练习参考答案 1. In 2004, inward FDI accounted for some 24 percent of gross capital formation in Ireland, but only 0.6 percent in Japan. What do you think explains this difference in FDI inflows into the two countries? Answer: Gross capital formation summarizes the total amount of capital invested in factories, stores, office buildings, and so on. When capital investment is high, a country has more favorable growth prospects. The difference between the rates of gross capital formation in Ireland and Japan would indicate that FDI is an important source of investment capital and economic growth in Ireland, but not in Japan. There are several reasons for this. Companies may perceive that Ireland is more attractive as a destination for their investments, or that it is easier to establish operation in Ireland than in Japan. Investors may be cautious about Japan because of its reputation for burdensome regulations. 2. Compare and contrast these explanations of horizontal FDI: the market imperfections approach, Vernon’s product life cycle theory, and Knickerbocker’s theory of FDI. Which theory do you think offers the best explanation of the historical pattern of horizontal FDI? Why? Answer: Internalization theory seeks to explain why firms often prefer foreign direct investment to licensing as a strategy for entering foreign markets. According to internationalization theory, licensing has three major drawbacks as a strategy for exploiting foreign market opportunities: licensing may result in a firm giving away proprietary technology, licensing does not permit a firm to maintain tight control over its activities, and licensing is not appropriate when a firm’s competitive advantage is based not so much on its products as on the management, marketing, and manufacturing capabilities that produce those produ