Test Bank Chapter 12 Private Enterprise And Development

Chapter 12

Private Enterprise and Development

Multiple Choice Questions

1. Foreign direct investment must have which of the following?
   1. A portfolio component
   2. A statement of corporate responsibility
   3. “Hot capital” flows
   4. A physical presence
   5. None of the above

1. Which of the following is the driver of capitalist economies?
   1. Private sector
   2. Public sector
   3. Institutions
   4. Normative structures
   5. Western governments
2. According to Joseph Schumpeter, what is the role of entrepreneurs in the economy?
   1. To oppose large corporations
   2. To generate growth via novel forms of communication and institutionalization
   3. To break economic paradigms
   4. To act creatively in the economy
   5. To see new ways to put economic factors together to cause economic growth
3. What did Grameen bank use to substitute for a lack of collateral or property rights?
   1. Compulsory spending
   2. Intensive surveillance by male relatives
   3. Collective responsibility
   4. Indebtedness
   5. Independence
4. In the Global South, where is most entrepreneurship located?
   1. Informal sector
   2. Formal sector
   3. Institutional sector
   4. Declared sector
   5. Non-profit sector
5. What is Muhammad Yunus and the Grameen Bank noted for?
   1. Establishing South–South cooperation
   2. The grey market
   3. Backing the Southern Development Bank
   4. Micro-finance
   5. Establishing mentorship for southern enterprises
6. Marxist-inspired authors have tended to view multinational corporations as which of the following?
   1. Homogenizing forces
   2. Representatives of the global capitalist system
   3. Trade regulators
   4. Self-interested organizations
   5. Promoting the interests of those in the developed world at the expense of those in the developing world
7. The “mercantile approach” has been particularly important in the study of which of the following?
   1. State–firm relations
   2. Civil society
   3. East-Asian development
   4. African development
   5. US multinationals
8. Who popularized the OLI paradigm to explain the characteristics of multinational corporations?
   1. Andre Gunder Frank
   2. Robert Gilpin
   3. Peter Evans
   4. John H. Dunning
   5. Raul Prebisch
9. According to the OLI paradigm, the multinational is NOT distinguished by the advantage of which of the following?
   1. Industrialization
   2. Ownership
   3. Location-specific assets
   4. Internalization
   5. The multinational is distinguished by all of the above.
10. According to the international business perspective, which of the following is NOT mentioned as one of the four strategies multinationals can use when seeking location-specific assets abroad?
    1. Resource
    2. Political
    3. Market
    4. Efficiency
    5. Strategic
11. “Obsolescing bargaining model” refers to __________________.
    1. the shift in power that occurs between states and firms over time
    2. the shifting ability of multinationals to bargain under international law
    3. the constantly-shifting power dynamics between MNCs and their stakeholders
    4. the continued erosion of state’s abilities to bargain with firms
    5. a model of state—firm relations, which argues that firms consistently hold more negotiating power than states
12. Which two countries signed the first bilateral investment treaty in 1959?
    1. Belgium and India
    2. Germany and Pakistan
    3. England and India
    4. US and Mexico
    5. Germany and Brazil
13. When do regulatory chills occur?
    1. When corporate social responsibility is high.
    2. When policy options are limited.
    3. When a government fears being sued by foreign investors.
    4. When investor–state relations are neglected.
    5. When a government accepts liberal trade objectives.
14. Western governments respond to international trade restraints by ________________.
    1. loosening domestic trade restraints
    2. dissolving bilateral investment protection agreements
    3. entering into bilateral investment protection agreements
    4. seeking out loopholes that would allow Western corporations to operate freely
    5. encouraging domestic companies to withdraw from the international arena
15. What is corporate social responsibility?
    1. Voluntary efforts on the part of firms to improve the quality of their relationships with stakeholders.
    2. Voluntary efforts on the part of firms to improve the quality of their relationships with shareholders.
    3. The legal commitment of firms to improve the quality of their relationships with stakeholders.
    4. The legal commitment of firms to improve the quality of their relationships with shareholders.
    5. Involuntary corporate actions that are the result of massive shareholder pressure.
16. Which of the following is NOT one of the “stakeholders” targeted by corporate social responsibility policies?
    1. Employees
    2. Local communities
    3. Indigenous communities
    4. People involved in nearby economic activities
    5. Corporate shareholders
17. Which is a key difference between MNCs and emerging MNCs?
    1. The importance of securing local approval before expansion.
    2. The importance of a stable working environment.
    3. The importance of local markets versus a focus on foreign markets.
    4. The importance placed on acquiring First World technology and managerial practices.
    5. The importance of attracting FDI.
18. What prompted the idea of “shared value” as developed by Harvard Business School professors Michael E. Porter and Mark R. Kramer?
    1. The capital potential of synergistic relationship between public and private enterprises
    2. To address business’ loss of legitimacy in the public eye
    3. To gain access to new markets in the Global South
    4. The demands of the New International Economic Order
    5. The pressure applied by the UN
19. How do NIDL defer from IDL?
    1. It refers to elitism.
    2. It refers to low-cost labour exploitation.
    3. It relates more to capital-intensive productive procedures.
    4. It relates more to MNC logic of industrialization.
    5. It refers to Cardoso and Faletto’s theory of entrepreneurship.
20. What is the main setback of associated dependent development?
    1. It took employment as a key element.
    2. It did not ignore the needs of poorer populations.
    3. It is a combination between employment and need of the poor.
    4. It does not work to foster industrialization.
    5. It is highly elitist.
21. What are internationalization advantages for MNCs?
    1. Those related to coordinating production within the hierarchical governments and states.
    2. Those related to coordinating production within the hierarchical governance structure of a firm.
    3. Those related to coordinating bargaining within the hierarchical governance structure of a firm.
    4. Those related to coordinating production within the horizontal and cooperative governance structure of a firm.
    5. Those related to coordinating production outside the hierarchical governance structure of a firm.
22. Companies more akin to networked structures because ________________.
    1. globalization and its effects on transportation and other features.
    2. of Schumpeter’s association between SME and innovation
    3. of colonialism and its effects
    4. it is a better way to promote development globally
    5. it is extremely expensive to develop telecommunication infrastructure
23. When and why did GVC theory emerge?
    1. In 2005, as a way to find pattern of learning for governments and firms.
    2. In the 21^st century because governments can help their companies upgrade into higher-value activities.
    3. Early in the 1990s to measure the ability of MNC to upgrade.
    4. Early in the 1990s to understand how different countries and companies participate in the creation of a single product.
    5. In 2005, to find better and more flexible contexts for international cooperation.
24. How do MNCs rely on GVCs?
    1. In relation to efficient operations and lower costs to consumers
    2. In relation to higher costs to consumers
    3. In relation to MNC power to innovate
    4. In relation to MNC power over SMEs
    5. To bargain with states and governments
25. What does resource-seeking strategies imply?
    1. MNCs establishment of a subsidiary
    2. MNCs plan to make their global operations more efficient
    3. Specific resources for MNCs in different countries
    4. MNCs buying up assets
    5. The location of light manufacturing and assembly plants in low-wage countries
26. What are two strategies that MNCs use when they go abroad to seek location-specific assets?
    1. Market and Efficiency
    2. Bargaining and obsolescence
    3. MNC and SME
    4. Mining an Agriculture mixed methods
    5. Assets and Bargaining
27. What does the obsolescing bargaining model offer?
    1. Variations on the flexibility of models
    2. Variations on the characterization of the different actors in MNCs and states
    3. More profits for MNCs
    4. An understanding about how both firm and state strength varies
    5. Several counterproductive issues
28. In what sense does bargaining affect the relationship between states and companies?
    1. On how much the firm contributes to the wealth of the richest 1 per cent
    2. On how much the firm contributes to globalization
    3. On how much the firm contributes to development
    4. On their counterproductive cooperation strategies
    5. None of the above
29. Why was the obsolescing bargaining model criticized?
    1. Because companies used other methods to protect themselves from governments
    2. Because companies could not always protect themselves from governments
    3. Because governments were corruptible
    4. Because the model was the only one being effective
    5. Because of the failure of the model to prevent counterproductive policies

True or False Questions

The terms “foreign direct investment,” “multinational enterprise,” and “transnational corporation” are essentially interchangeable.

Increasingly, governments and development agencies view private sector investment as hostile to economic development.

Compared to foreign direct investment, foreign portfolio investment flows into developing countries are less stable.

Most entrepreneurial activity in the informal sector have to contend with regulatory hurdles such as health and safety rules.

The top 100 multinational corporations are highly concentrated, and control a significant proportion of total foreign assets, sales, and employment of all MNCs.

Market-seeking MNCs depend on unskilled workers, pay lower wages, and contribute to an unhealthy domestic economy.

According to the OLI paradigm, when a location’s assets abroad offer something important to a firm’s activities, a trading relationship with that country is the firm’s highest priority.

The world’s 100 largest MNCs are disproportionately from developing countries.

Obsolescing bargaining model sees bargaining between governments and MNCs as static.

The dominant school of thought in international development from the critical school is dependency theory.

The obsolescing bargaining model holds that states have initial power in bargaining with MNCs but that the power shifts to favour firms once the investment is sunk in the country.

The international division of labour has maintained or deepened underdevelopment in the periphery.

The OLI paradigm is part of the mercantile approach to MNCs in the field of development.

International agreements expand the scope of policy choices available to governments in their relationships with MNCs.

By organizing production inside the multinational, they benefit from lower transaction costs and are able to fully exploit ownership advantages without losing control of them on the open market.

The promotion of corporate social responsibility is used to forestall government regulation of MNCs.

Corporate social responsibility is complemented in developed countries by a strong legal and social framework that requires high standards of behaviour.

International investment agreements have been proven to contribute to increased investment.

Corporate social responsibility programs are being implemented less frequently.

John Dunning was the first intellectual to theorize about entrepreneurship.

Joseph Schumpeter argued that the function of the entrepreneur was to innovate as they had an ability to see new ways of putting economic factors together to cause economic growth.

MNCs are being affected by informality.

Those working in the informal sector in developing countries effectively control their assets from the state.

Rules to permit businesses to establish themselves easily is a pillar of entrepreneurship.

Multinationals from developing countries, sometimes called emerging multinationals (EMNCs) have been rapidly growing and becoming increasingly transnationalized.

Through micro-finance, entrepreneurship can be fostered.

During the Cold War, the US administrations used their connections with certain multinational corporations to pursue specific foreign policy objectives in the developing world.

MNCs depend on micro-finance.

Marxist-inspired scholars view multinational corporations as representatives of the global capitalist system.

Peripherical countries remained underdeveloped due to the actions of MNCs.

Female employees who form the backbone of the cheap labour force are not usually exploited by MNCs.

Short Answer Questions

1. Discuss what makes an MNC different from a regular enterprise.
2. How did Joseph Schumpeter conceptualize entrepreneurship and its role in capitalist economic development?
3. What is the informal sector and why is it important?
4. Briefly discuss dependency theory’s view of MNCs’ role in the maintenance of underdevelopment in the periphery.
5. Briefly discuss the relationship between the mercantile approach and national interest.
6. Briefly discuss common motivations for multinationals to go abroad.
7. What are the basic features of the OLI paradigm to explain the characteristics of multinational corporations?
8. How does the existence of multinationals prove that free markets are “imperfect and inefficient”?
9. How is the production process of multinational corporations hierarchical?
10. According to the obsolescing bargaining model, describe the power shift that occurs over time in state/firm bargaining.
11. Define and describe corporate social responsibility (CSR).
12. What are bilateral investment treaties?
13. Discuss the emerging phenomenon of “partnerships for development”?
14. How do bilateral investment treaties protect investors and compromise the relative power of governments?
15. Why are partnerships between MNCs and NGOs/public bodies contentious?
16. What are emerging multinational corporations and how do they differ from Northern MNCs?
17. Explore the concept of “shared value” that was developed by Harvard Business School professors Michael E. Porter and Mark R. Kramer.
18. Why is the Bill and Melinda Gates Foundation a significant development actor?
19. What are John Dunning’s key features of multinational corporations?
20. Explain why public-private partnerships are often contentious.
21. How do SMEs compare to MNCs?
22. Describe some of the motivations behind the expansion of MNCs.

Essay Questions

1. What is micro-finance and why is it an important concept in the field of international development?
2. Compare and contrast the critical, mercantilist, and international business perspective approaches to MNCs.
3. What is corporate social responsibility and why is it a controversial topic in the study of international development?
4. How is innovation in entrepreneurship affected by informality? Compare Schumpeter’s definition to de Soto’s perspective.
5. How have mining companies been at the forefront of corporate social responsibility (CSR) adoption and practice?