DBA Global Business Strategy and International Management 2 — Questions and Answers
Question 1: Which of the following BEST describes the concept of 'institutional voids' in emerging markets?
- The absence of skilled labor in developing economies
- Gaps in market-supporting institutions such as contract enforcement and information intermediaries (Correct answer)
- Tax loopholes exploited by multinational corporations
- Regulatory excess that stifles entrepreneurship
Correct answer: Gaps in market-supporting institutions such as contract enforcement and information intermediaries
Institutional voids refer to the absence or underdevelopment of market-supporting institutions—reliable courts, credit rating agencies, regulatory bodies—that multinationals depend on in advanced economies.
Question 2: A firm pursuing a 'born global' strategy is best characterized as:
- A firm that restricts sales to its home country for the first decade
- A firm that enters international markets from or near its inception (Correct answer)
- A large multinational that acquires foreign companies early in its life cycle
- A firm that outsources all manufacturing to low-cost countries immediately
Correct answer: A firm that enters international markets from or near its inception
Born globals are small or medium enterprises that pursue international markets almost immediately after founding, bypassing the incremental stages described by traditional internationalization models.
Question 3: In global value chain analysis, 'value capture' refers to:
- The total revenue generated by all firms in the chain
- The share of value-added profit a firm retains from its position in the chain (Correct answer)
- The process of acquiring competitors along the value chain
- The alignment of customer perceptions with brand value
Correct answer: The share of value-added profit a firm retains from its position in the chain
Value capture describes how much of the value created in a global production network a particular firm can retain as profit, which depends on its bargaining power, governance position, and uniqueness of capabilities.
Question 4: The 'liability of foreignness' in international business refers to:
- Higher import duties imposed on foreign companies
- Costs and disadvantages that foreign firms face relative to local incumbents (Correct answer)
- Legal restrictions on foreign direct investment
- Currency conversion costs for cross-border transactions
Correct answer: Costs and disadvantages that foreign firms face relative to local incumbents
Liability of foreignness (coined by Hymer and later Zaheer) encompasses the additional costs—informational, cultural, relational—that foreign firms bear when operating in a host country where local firms have inherent advantages.
Question 5: Which organizational structure is MOST appropriate for a multinational pursuing a multidomestic strategy?
- Global functional structure
- International division structure
- Worldwide geographic area structure (Correct answer)
- Worldwide product division structure
Correct answer: Worldwide geographic area structure
A worldwide geographic area structure decentralizes decision-making to regional or country managers, enabling high local responsiveness that is the hallmark of a multidomestic strategy.
Question 6: Cross-cultural management research by Hofstede identifies 'uncertainty avoidance' as:
- The degree to which a society tolerates ambiguity and accepts that the future is uncertain (Correct answer)
- A firm's strategy to hedge against foreign exchange volatility
- The tendency of managers to delay decisions under competitive pressure
- The extent to which a culture favors risk-taking in entrepreneurship
Correct answer: The degree to which a society tolerates ambiguity and accepts that the future is uncertain
Hofstede's uncertainty avoidance index measures the extent to which people in a culture feel uncomfortable with uncertainty and ambiguity, leading to rule-oriented, risk-avoiding behavior at high levels.
Question 7: Which of the following describes 'reverse innovation,' a concept popularized by Immelt, Govindarajan, and Trimble?
- Repatriating profits from foreign subsidiaries to the headquarters country
- Innovations developed in emerging markets that are later adopted in developed markets (Correct answer)
- Adapting products designed for wealthy consumers for low-income segments
- Transferring manufacturing processes from high-cost to low-cost countries
Correct answer: Innovations developed in emerging markets that are later adopted in developed markets
Reverse innovation (or frugal innovation diffusion) occurs when products designed or first commercialized in emerging markets—often to serve resource-constrained customers—are subsequently sold in advanced economies.
DBA Global Business Strategy and International Management 2
Which of the following BEST describes the concept of 'institutional voids' in emerging markets?