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Chapter
6 Outline
Critical Discussion Questions
- In recent years, Japanese FDI in the United States has
grown far more rapidly than US FDI in Japan. Why do you think this is
the case? What are the implications of this trend?
- 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?
- Compare and contrast these explanations of vertical FDI:
the strategic behavior approach and the market imperfections approach.
Which theory do you think offers the better explanation of the historical
pattern of vertical FDI? Why?
- You are the international manager of a US business that
has just developed a revolutionary new personal computer that can perform
the same functions as IBM and Apple computers and their clones but costs
only half as much to manufacture. Your CEO has asked you to formulate
a recommendation for how to expand into Western Europe. Your options
are (a) to export from
the United States, (b)
to license a European firm to manufacture and market the computer in
Europe, and (c) to set
up a wholly owned subsidiary in Europe. Evaluate the pros and cons of
each alternative and suggest a course of action to your CEO.
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