Which of the Following Is a Major Drawback of Using

question 53

Multiple Choice

Which of the following is a major drawback of using Knickerbocker's theory in explaining FDI?

• A) It ignores the fact that firms invest in a foreign country when demand in that country will support local production.
• B) It does not explain why the first firm in an oligopoly decides to undertake FDI rather than to export or license.
• C) It fails to identify when it is profitable to invest abroad.
• D) It ignores the fact that licensing as an entry strategy has its limitations.

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Definitions:

Straight-Line Rate

A method of calculating depreciation of an asset, which assumes the asset will lose an equal amount of value each year over its useful life.

Annual Straight-Line Depreciation

A method of calculating the depreciation of an asset, spreading its cost evenly over its useful life.

Straight-Line Depreciation Rate

A method of calculating the depreciation of an asset, where the asset's cost is evenly distributed over its useful life.

Useful Life

The estimated duration an asset is expected to be economically usable, with normal wear and tear.