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Questions and Answers
Which country is identified as a persistent investor?
Which country is identified as a persistent investor?
What key characteristic defines erratic investors?
What key characteristic defines erratic investors?
Which of the following countries is considered a latecomer investor?
Which of the following countries is considered a latecomer investor?
Which reason contributed to Japan's categorization as an erratic investor?
Which reason contributed to Japan's categorization as an erratic investor?
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What was a trend for southern European countries regarding foreign direct investment?
What was a trend for southern European countries regarding foreign direct investment?
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What event significantly affected the Japanese economy and its investment growth?
What event significantly affected the Japanese economy and its investment growth?
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Which of the following best describes the investment activity of British companies despite their economic decline?
Which of the following best describes the investment activity of British companies despite their economic decline?
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When did outward foreign direct investment from emerging economies in Asia and Latin America begin to increase substantially?
When did outward foreign direct investment from emerging economies in Asia and Latin America begin to increase substantially?
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By 1970, which country had a higher share of the 100 largest enterprises in manufacturing net output?
By 1970, which country had a higher share of the 100 largest enterprises in manufacturing net output?
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What advantage did British companies have in capital-raising?
What advantage did British companies have in capital-raising?
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Which of the following countries had lower concentration levels of enterprises compared to the United Kingdom?
Which of the following countries had lower concentration levels of enterprises compared to the United Kingdom?
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How does the influence of culture on multinationals compare across countries?
How does the influence of culture on multinationals compare across countries?
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What does the investment development path model correlate with a country's international investment position?
What does the investment development path model correlate with a country's international investment position?
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Which country's colonial and mercantile traditions contributed to a strong outward-looking commercial culture?
Which country's colonial and mercantile traditions contributed to a strong outward-looking commercial culture?
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What was a significant aspect of the outward orientation in Britain and the Netherlands?
What was a significant aspect of the outward orientation in Britain and the Netherlands?
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In which stage of the evolutionary model does a country begin to attract inward foreign direct investment (FDI)?
In which stage of the evolutionary model does a country begin to attract inward foreign direct investment (FDI)?
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Which stage indicates that a country's net inward investment per capita begins to fall?
Which stage indicates that a country's net inward investment per capita begins to fall?
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Which of these countries was a major source of emigrants in the nineteenth century?
Which of these countries was a major source of emigrants in the nineteenth century?
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What characterizes Stage 4 of the investment development path model?
What characterizes Stage 4 of the investment development path model?
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Which languages were widely understood in the United States following the waves of immigration?
Which languages were widely understood in the United States following the waves of immigration?
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In the investment development path model, which stage occurs immediately after pre-industrialization?
In the investment development path model, which stage occurs immediately after pre-industrialization?
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What happens to a developing economy in Stage 1 of the investment development path model?
What happens to a developing economy in Stage 1 of the investment development path model?
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What factor primarily leads to the reduction of variable costs, prompting FDI attraction in Stage 2?
What factor primarily leads to the reduction of variable costs, prompting FDI attraction in Stage 2?
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Which of the following does NOT accurately describe the stages of the investment development path model?
Which of the following does NOT accurately describe the stages of the investment development path model?
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What is one reason for the decline in net inward investment per capita in Stage 3 of the evolutionary model?
What is one reason for the decline in net inward investment per capita in Stage 3 of the evolutionary model?
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In Stage 4 of the evolutionary model, what characterizes the country's investment flows?
In Stage 4 of the evolutionary model, what characterizes the country's investment flows?
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Which of the following does the Porter Diamond model identify as a critical factor for international competitive advantage?
Which of the following does the Porter Diamond model identify as a critical factor for international competitive advantage?
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What is a limitation of the evolutionary models in explaining multinational investment patterns?
What is a limitation of the evolutionary models in explaining multinational investment patterns?
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Which determinant does not fall under the four sets of attributes critical for competitiveness in the Porter Diamond model?
Which determinant does not fall under the four sets of attributes critical for competitiveness in the Porter Diamond model?
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How can local firms develop their own comparative ownership advantages according to the evolutionary model?
How can local firms develop their own comparative ownership advantages according to the evolutionary model?
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What role does the home country environment play in the Porter Diamond model?
What role does the home country environment play in the Porter Diamond model?
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Which aspect of the Porter Diamond model is most closely related to how firms can learn from competition?
Which aspect of the Porter Diamond model is most closely related to how firms can learn from competition?
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What characterized Japan's culture during the Edo era?
What characterized Japan's culture during the Edo era?
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Which countries historically had prominent roles in foreign direct investment (FDI) due to their individualistic cultures?
Which countries historically had prominent roles in foreign direct investment (FDI) due to their individualistic cultures?
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What risk attribute describes the cultures that provide competitive advantages in international business?
What risk attribute describes the cultures that provide competitive advantages in international business?
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What factor contributed to the low level of German FDI after World War I?
What factor contributed to the low level of German FDI after World War I?
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Which concept is often associated with cultures that tolerate uncertainty?
Which concept is often associated with cultures that tolerate uncertainty?
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How did the Treaty of Versailles affect Germany's economic situation after World War I?
How did the Treaty of Versailles affect Germany's economic situation after World War I?
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Which industries were noted for high-risk business environments that individualistic cultures tend to dominate?
Which industries were noted for high-risk business environments that individualistic cultures tend to dominate?
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What significant cultural characteristic defines countries with high levels of foreign direct investment?
What significant cultural characteristic defines countries with high levels of foreign direct investment?
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What does the performance divergence among firms from the same country indicate?
What does the performance divergence among firms from the same country indicate?
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Which of the following examples illustrates a significant performance variance within the same national industry?
Which of the following examples illustrates a significant performance variance within the same national industry?
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What factor contributed to the distinctiveness of the largest multinationals in the twentieth century?
What factor contributed to the distinctiveness of the largest multinationals in the twentieth century?
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How did firms maintain prominence in industries despite changes in their home countries' advantages?
How did firms maintain prominence in industries despite changes in their home countries' advantages?
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Which company was acquired by France's Renault due to poor performance?
Which company was acquired by France's Renault due to poor performance?
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What is a common trait of firms from the same country according to the content?
What is a common trait of firms from the same country according to the content?
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Why did the largest multinationals succeed despite various challenges?
Why did the largest multinationals succeed despite various challenges?
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What is indicated by the statement that home country characteristics only provide a partial explanation for multinationals?
What is indicated by the statement that home country characteristics only provide a partial explanation for multinationals?
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Study Notes
Chapter 9: Multinationals and Home Economies
- This chapter examines the relationship between multinational companies and their home economies
- The organization of knowledge within firms is shaped by the interplay of national institutions and entrepreneurship.
- Different countries' firms develop unique capabilities and organizational structures.
- The chapter analyzes long-term variations in investment propensities and geographical/sectoral distribution of investments by different nationalities.
- The impact of multinationals on their home economies is also discussed.
- The chapter concludes with a discussion on whether nationality still matters.
9.1 Multinationals and Nations
- The chapter explores the relationship between multinational companies and their home economies.
- The organization of knowledge within firms is influenced by national institutions and entrepreneurship.
- Firms from different countries develop distinct capabilities and organizational structures.
- This is reflected in their strategies and organizational forms.
- The chapter investigates long-term differences in investment patterns and the geographic/sectoral distribution of investments.
- The chapter examines the effect of multinationals on their home economies.
- The issue of whether nationality still plays a role is discussed.
9.2 Home Economies Over Time
9.2.1 The Geographical Distribution of Multinationals
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Ownership patterns reflect national differences in the timing of international business activities.
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Three categories of home economies are identified in historical perspective: persistent investors, erratic investors, and latecomer investors.
- Persistent investors (e.g., US, UK, Netherlands): began to invest in the 19th century and continued on a substantial scale.
- Erratic investors (e.g., France, Germany, Japan): were major capital exporters before 1914 and continued as active investors. Japan's late industrialization and lower incomes impacted these firms.
- Latecomer investors (e.g., Italy, Spain, Singapore, Brazil, Hong Kong, Taiwan): began investment gradually.
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The continued investment from certain countries despite factors like economic decline is noted.
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The role of home-country assets & attributes, and the impact they have on multinational firms is discussed.
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There are examples of persistent investors (the United States), erratic investors (France and Germany), and latecomer investors (Italy, Spain, Singapore, Brazil).
9.2.2 Evolutionary Model
- The model links national differences in multinational investment with the stage of a country's economic development.
- A country's international investment position is related to its Gross National Product (GNP) per capita.
- Four stages are identified: pre-industrialization, attraction of inward FDI, decline of inward investment, and outward investment.
- Stage 1: No inward or outward FDI during pre-industrialization.
- Stage 2: Increased domestic markets and reduced service costs begin to attract inward FDI.
- Stage 3: A country's net inward investment per capita begins to decrease.
- Stage 4: The country becomes a net outward investor with its investments exceeding those of foreign-owned firms within the country.
- The impact of pre-existing advantages, local firm development and ownership advantages in these stages is discussed.
9.2.3 Porter Diamond Model of International Competitive Advantage
- The home country environment's impact
- Four attributes of a home economy critical to its firms' competitiveness:
- Level/composition of natural and created resources
- Demand by domestic consumers (quantity and quality)
- Extent of opportunities in external economies (clustering)
- Strategy, structure, and rivalry amongst firms
- The model explains national variations in sectoral distribution of FDI, relating it to natural resources and skills.
- Examples include Swedish multinationals (iron ore, forest products) and Swiss companies (dairy products).
- The origins of competitiveness (in advanced engineering products in Sweden) relate to human capital investment, including technical schools and general literacy.
- It recognizes the role of institutions and arrangements that encourage knowledge acquisition from abroad.
- US leadership in computer and information technology is linked to market size, defense spending, and interactions between firms, universities, and venture capitalists.
9.2.4 The Role of Culture
- National cultural values influence firms' organization and management behavior.
- Analysis of home-country cultural influence on multinationals is difficult.
- Cultural influences on outward investment may lead to differences in outward and inward investment orientations.
- Colonial and mercantile traditions shaped outward orientations in certain countries. Migration flows often mirror these trends.
- Experiences of inward orientation (like Japan's prior national seclusion) affected their cultural development.
- The relationship between culture and FDI, particularly in challenging environments like resource extraction, is considered.
9.2.5 Wars and Chance
- Wars and random events significantly influence multinational investments and businesses.
- Example: World War I and the Treaty of Versailles affected the post-war international business environment across several countries and their FDI practices.
- The sequestrations of assets affected the low-level FDI.
- These events have impacted countries in different ways, as exemplified by the neutral status of Sweden & Switzerland & the Netherlands in this period.
- Nationalistic developments in developing countries and decolonization further shaped the business environment.
- The significance of these forces despite massive changes remains an essential part of the context of international business.
9.2.6 Firm, Nations, and Firms
- Domestic country characteristics partially shape the dynamics of multinationals.
- Strong country commonalities can be seen in the strategies pursued by domestic companies.
- National firms do not uniformly share the same domestic resources.
- Significant performance disparities exist among firms headquartered in the same country.
- Case examples (like the comparative experience among significant Japanese automobile producers) were noted to demonstrate that home country characteristics alone do not fully explain success or failure.
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Explore key questions related to foreign direct investment, focusing on distinct investor characteristics and global trends. This quiz covers the roles of various countries and the impact of historical events on investment activities. Test your knowledge about the dynamics of international investment patterns.
