RSM Internationalization 2

Question 1

According to Dunning's OLI paradigm, which advantage explains why a firm chooses to produce abroad rather than export?

Accepted Answer

Location advantage

Answer

Location (L) advantages—such as lower costs, natural resources, or market access—explain why production occurs in a foreign country rather than at home.

Question 2

The concept of 'liability of foreignness' refers to:

Accepted Answer

Additional costs firms face when operating in unfamiliar foreign markets

Answer

Liability of foreignness (Hymer, Zaheer) describes the extra costs and disadvantages MNEs face compared to local competitors due to unfamiliarity with the host environment.

Question 3

Which entry mode gives a firm the MOST control over its foreign operations but requires the HIGHEST resource commitment?

Accepted Answer

Wholly owned subsidiary

Answer

A wholly owned subsidiary provides maximum control since the parent owns 100% equity, but demands the highest capital investment and management resources.

Question 4

In Hofstede's cultural dimensions, a country scoring HIGH on 'uncertainty avoidance' tends to:

Accepted Answer

Prefer structured rules, formality, and predictability

Answer

High uncertainty avoidance cultures (e.g., Greece, Portugal) rely on explicit rules and formal procedures to minimize ambiguous situations.

Question 5

Transaction Cost Theory applied to internationalization suggests firms internalize activities abroad when:

Accepted Answer

Market imperfections make external transactions costly or risky

Answer

Williamson's transaction cost logic holds that firms integrate foreign operations when market failures—opportunism, asset specificity, uncertainty—make arm's-length contracts inefficient.

(RSM) Rotterdam School of Management Practice Test

(RSM) Rotterdam School of Management Practice Test

RSM Internationalization 2