Foreign operations modes Test Questions & Answers Chapter 9

Chapter 10

Test Bank

Type: multiple response question

Title: Chapter 10 Question 01

1) How may the global factory contribute to environmentally and socially unsustainable practices? Please select all that apply.

Feedback: The global factory may contribute to environmental and social problems in a host country. There are too many examples to state otherwise. But it is not the global factory or FDI per se that is negative for the host and home economy, it is the interplay between the (poor) local institutional environment (see also Chapter 5) and the MNE which creates the conditions for a negative impact.

A-head reference: 10.1 Introduction.

a. Locating manufacturing facilities in locations with weak institutions and/or weak enforcement of legislation.

b. Outsourcing manufacturing without due diligence of the supplier nor monitoring his practices.

c. Exploiting its international links and network for the sourcing of and state-of-art inputs.

d. Simply by investing overseas. Any FDI is harmful.

Type: multiple response question

Title: Chapter 10 Question 02

2) Is climate change affecting the international operations of MNEs? Please select all that apply.

Feedback: MNEs are increasingly recognising how climate change is affecting their operations and, in some cases, their long-term viability. This is because agricultural sectors are directly affected by climate change and force the relocation of farms. Climate change can also positively affect MNEs by opening new markets and trade opportunities.

A-head reference: 10.5 Sustainable development theories

a. Climate change is no concern to MNEs. The natural phenomenon is blown out of proportion.

b. Climate change is a concern to MNEs because it has the potential to disrupt and displace supply chains and locations of production.

c. Climate change is a concern to MNEs because it affects the prosperity of nations and thus markets.

d. Climate change is no concern to MNEs because no MNE is really dependent on the weather thanks to modern technology.

Type: multiple response question

Title: Chapter 10 Question 03

3) Stakeholders vary in their impact. Which classifications are part of the salient stakeholder model? Please select all that apply.

Feedback: The salient stakeholder approach by Mitchell et al. (1997) has three components (power, urgency, legitimacy) which, when combined, lead to seven classifications of stakeholders. The classifications are definitive, dominant, dependent, dangerous, demanding, discretionary, and dormant (in descending order of importance).

A-head reference: 10.4 Corporate social responsibility and stakeholder theories

a. Dominant stakeholder

b. Diminutive stakeholder

c. Dangerous stakeholder

d. Dormant stakeholder

Type: multiple response question

Title: Chapter 10 Question 04

4) Are sustainable innovations in the interest of for-profit organizations? Please select all that apply.

Feedback: According Porter and van der Linde (1995) they are mutually dependent. Sustainable innovations can lead a reduction in waste and better usage of available resources. MNEs that push for sustainable innovation are therefore directly benefitting from such activities.

A-head reference: 10.5 Sustainable development theories

a. Sustainable innovation efforts are a PR activity to ecologically minded consumers only. They do not bring profit.

b. Sustainable innovation is essential for increasing productivity and reducing resource costs.

c. Sustainable innovations open new marketed for MNEs in both advanced economies and developing economies.

d. Sustainable innovations do not exist in MNEs. They are focused on profit maximization at all costs.

Type: multiple response question

Title: Chapter 10 Question 05

5) Do MNEs have a permanent social license to operate? Please select all that apply.

Feedback: MNEs and their activities are increasingly falling under the scrutiny of governments, regulatory authorities, NGOs, and supranational agencies, such as the European Commission and the United Nations, as well as the (social) media around the world. This adds an extra element of complexity to the managerial decision-making process in an international setting.

A-head reference: 10.6 Business ethics and human rights

a. MNEs gain their licence to operate from the government, not from society.

b. MNEs are constantly evaluated by society about their conduct and benefit to society.

c. MNEs have a permanent social license to operate.

d. MNEs are increasingly scrutinized and have become more transparent thanks to social pressure.

Type: true-false

Title: Chapter 10 Question 06

6) There exists legislation on corruption with extraterritorial reach.

a. True

Feedback: The US Foreign Corrupt Practices Act (1977) and the UK Bribery Act (2010) are two examples of anti-corruption laws that have extraterritorial power. The FCPA has been used extensively to penalise the bribing of overseas government officials.

A-head reference: 10.5 Sustainable development theories

b. False

Type: true-false

Title: Chapter 10 Question 07

7) MNEs only need to collect and be aware of the greenhouse gas emissions across activities they own.

a. True

Feedback: MNEs collect data across three categories: Scope 1 (direct emissions from sources owned by the MNE), Scope 2 (emissions reported by the MNE but generated elsewhere), and Scope 3 (indirect emissions). In order to successfully curb and reduce emissions the whole value chain and life time of the product need to be considered.

A-head reference: 10.5 Sustainable development theories

b. False

Type: true-false

Title: Chapter 10 Question 08

8) The global factory has no particular ethical business obligation because it operates across multiple countries and independent companies.

a. True

Feedback: The global factory works across borders and societies. As such, it is exposed to different interpretations of business ethics and needs to take them into consideration. Neglecting or rejecting locally relevant interpretations of business ethics can negatively affect the social license to operate.

A-head reference: 10.2 Corporate social responsibility: some core concepts

b. False

Type: true-false

Title: Chapter 10 Question 09

9) The salient stakeholder model includes the three components urgency, money, and legitimacy.

a. True

b. False

Feedback: The salient stakeholder model by Mitchell et al. (1997) includes three components: Urgency, power, and legitimacy. When all three components are present at the same time is the stakeholder most salient.

A-head reference: 10.4 Corporate social responsibility and stakeholder theories

Type: true-false

Title: Chapter 10 Question 10

10) Ethical and eco-labels are always created by government agencies and are an attempt to create institutional barriers for businesses.

a. True

Feedback: Ethical and eco-labels can be created by government agencies – but also by NGOs, industry bodies, or businesses. Which label is most effective does not depend on who created it but on how it is implemented and which criteria it applies.

A-head reference: 10.6 Business ethics and human rights

b. False

Type: multiple choice question

Title: Chapter 10 Question 11

11) The strategy of a company should be

Feedback: When firms pursue a narrow, profit-driven strategy, many stakeholders and their interests are often neglected. CSR thus deals with the economic, social, and environmental accountabilities and responsibilities of a business (Elkington, 1997).

A-head reference: 10.1 Introduction

a. Economic driven (wealth creation, and shareholder value maximization)

b. Socially driven (developing human and physical resources from society)

c. Both economic and socially driven

d. None of the above

Type: multiple response question

Title: Chapter 10 Question 12

12) What are three fundamental principles of CSR? (select all that apply)

Feedback: The first construct concerns business ethics. The notion of business ethics captures the idea that responsibility implies an ‘obligation’. The second construct is corporate citizenship. Here, the idea is that companies are analogous to citizens. The third concept relates to stakeholder interests. Donaldson and Preston (1995, p. 85) define stakeholders as those individuals or groups of people who ‘are identified through the actual or potential harms and benefits that they experience or anticipate experiencing as a result of the firm’s actions or inactions’.

A-head reference: 10.2 Corporate social responsibility: some core concepts

a. Business Ethics

b. Corporate citizenship

c. Stakeholder interests

d. Institution’s progress

Type: multiple choice question

Title: Chapter 10 Question 13

13) CSR applies to

Feedback: Corporate social responsibility applies to any firm, regardless the dimension or whether it operates purely in a domestic context or has international operations.

A-head reference: 10.3 Corporate social responsibility and the global factory

a. MNEs

b. SMEs

c. Domestic firms

d. All firms

Type: multiple response question

Title: Chapter 10 Question 14

14) External stakeholders are (select all that apply)

Feedback: The external stakeholders range from suppliers to customers, from local and national governments to supranational organizations, such as the European Union (EU) and the World Trade Organization (WTO), and from competitors to civil society organizations (CSOs). Moreover, considering only ‘human’ stakeholders overlooks a key factor on which businesses have a significant impact: the natural environment.

A-head reference: 10.4 Corporate social responsibility and stakeholder theories

a. Firm employees

b. Customers and suppliers

c. Governments and other institutions

d. Managers of competing firms

Type: multiple choice question

Title: Chapter 10 Question 15

15) What is business ethics?

Feedback: We have already explained that business ethics is concerned with what constitutes fair, just, and correct treatment of employees, suppliers, civil society, and other stakeholders, including the natural environment (Crane, Matten, Glozer, and Spence, 2019). Although the issues surrounding ‘right’ or ‘wrong’ behaviour in areas such as labour rights, worker treatment, or corruption span national borders, there is no universal moral code that firms can follow.

A-head reference: 10.6 Business ethics and human rights

a. Business ethics is about what is universally recognised as right and wrong

b. Business ethics is concerned with what constitutes fair, just, and correct treatment of employees, suppliers, civil society, and other stakeholders, including the natural environment

c. Business ethics is about finding a universal moral code that firms can follow

d. Business ethics is a relative concept and cannot be applied to firms internationally because behaviour in areas such as labour rights, worker treatment, or corruption span national borders

Type: true-false

Title: Chapter 10 Question 16

16) Natural environment is an external stakeholder

a. True

Feedback: CSR is concerned, among other things, with social and environmental well-being, and that the natural environment is a key stakeholder

A-head reference: 10.5 Sustainable development theories

b. False

Type: true-false

Title: Chapter 10 Question 17

17) The natural environment is a public good that is available to anyone free of charge

a. True

b. False

Feedback: Because the environment has no voice as such and no immediate monetary value is attached to the usage of nature, it is said that there is little consideration given to the environment in strategic business decisions. As a consequence, businesses are said to influence and exploit the regulatory environment in home and host countries to reduce their investments in environmental protection.

A-head reference: 10.5 Sustainable development theories

Type: true-false

Title: Chapter 10 Question 18

18) Generally, in European countries, ethical business practices are negotiated between social governments, trade unions and firms and controlled by society

a. True

Feedback: In Europe, ethical business practices are negotiated by the government, trade unions, and corporate associations, and are controlled by society.

A-head reference: 10.6 Business ethics and human rights

b. False

Type: true-false

Title: Chapter 10 Question 19

19) Similarly to European countries, in US ethical business practices are negotiated between social governments, trade unions and firms and controlled by society and corporations

a. True

b. False

Feedback: In the United States, and similarly in Asia, the corporation is responsible for setting its own codes, which are monitored by individuals.

A-head reference: 10.6 Business ethics and human rights

Type: true-false

Title: Chapter 10 Question 20

20) CSR has an impact on location decision decisions

a. True

Feedback: Regardless of the internationalization mode, CSR can impact upon location decisions (whether to operate abroad, where to operate abroad, and why) for example because different countries may have different labour standards apply

A-head reference: 10.3 Corporate social responsibility and the global factory

b. False