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Multinational Corporations (MNCs): Definition, Types, and Environments

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Questions and Answers

What is the main difference between horizontally and vertically integrated MNCs?

The level of control over their subsidiaries
Their objectives in the global market
The number of countries they operate in
Their organizational structure and supply chain management (correct)

What is the primary purpose of the TNI Index?

To evaluate the economic environment of a country
To calculate the exchange rate of a country's currency
To determine the level of globalization of an MNC (correct)
To measure the level of corruption in a country

What is the main difference between Foreign Direct Investment (FDI) and Foreign Portfolio Investment (FPI)?

FDI involves long-term control, while FPI involves short-term control (correct)
FDI involves horizontal integration, while FPI involves vertical integration
FDI is used for tax saving motives, while FPI is used for strategic motives
FDI involves ownership of more than 10% of a company's stock, while FPI involves ownership of less than 10%

What is the main motivation behind the 'Tax saving motive' for Foreign Direct Investment (FDI)?

To avoid corporate income taxes (A) Signup and view all the answers

What is the term for the networks of relationships and obligations in China?

Guanxi (D) Signup and view all the answers

What is the primary goal of natural hedging?

To match foreign exchange inflows and outflows (B) Signup and view all the answers

What is the main idea behind the 'Internalization' theory of Foreign Direct Investment (FDI)?

That firms invest abroad to take advantage of internalization benefits (A) Signup and view all the answers

What is the main characteristic of a 'Vertically integrated' Foreign Direct Investment (FDI)?

Investing in different stages of production within a host country (A) Signup and view all the answers

What is the name of the legislation that regulates bribery in the US?

Foreign Corrupt Practices Act (B) Signup and view all the answers

What is the main purpose of using an FX swap in the context of Foreign Exchange (FX) risk management?

To hedge against FX rate risks (D) Signup and view all the answers

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