Term
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Definition
Superior features of a country that provide it with unique benefits in global competition typically derived from either natural endowments or deliberate national policies.
Ex. – labor, climate, arable land, petroleum reserves; entrepreneurial orientation, availability of venture capital, innovative capacity |
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Definition
| Distinctive assets or competencies of a firm – typically derived from cost, size, or innovation strengths – that are difficult for competitors to replicate or imitate |
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Term
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Definition
| The belief that national prosperity is the result of a positive balance of trade, achieved by maximizing exports and minimizing imports |
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Term
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Definition
| Relative absence of restrictions to the flow of goods and services between nations. |
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Term
| Absolute Advantage Principle |
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Definition
A country benefits by producing only those products in which it has an absolute advantage, or can produce using fewer resources than another country.
Ex. - France has an absolute advantage in cloth, while Germany
has an advantage in wheat. If they both specialized and traded,
they could get more for their labor |
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Term
| Comparative Advantage Principle |
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Definition
It can be beneficial for two countries to trade without barriers as long as one is more efficient at producing goods or services needed by the other. What matters is not the absolute cost of production, but rather the relative efficiency with which a country can produce the product.
Ex. – By comparison, Germany is 3 times as efficient in
producing cloth than wheat than France. By the comparative
advantage principle, it is more efficient for both countries
for Germany to produce cloth and France wheat |
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Term
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Definition
| refers to a concentration of businesses, suppliers, and supporting firms in the same industry at a particular location, characterized by a critical mass of human talent, capital, or other factor endowments |
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| National Industrial Policy |
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Definition
| a proactive economic development plan initiated by the public sector, often in collaboration with the private sector, that aims to develop or support particular industries within the nation |
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Term
| International Product Cycle Theory |
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Definition
| Products that involve technical innovations typically go through cycles, in which they are introduced, grow, and mature. They are introduced in advanced countries, grow, and then once they are standardized and mature they are produced where it is cheapest. The comparative advantage moves from country to country. |
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Term
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Definition
Key Characteristics – The firm acquires and retains one or more value-chain activities within the firm.
Benefits – Minimizes the disadvantages of relying on intermediaries, collaborators, or other external partners. Ensures greater control over foreign operations, helping to maximize product quality, reliable manufacturing processes, and sound marketing practices. Reduces the risk that knowledge and proprietary assets will be lost to competitors.
Examples – Japanese MNE Toshiba owns and operates factories in dozens of countries |
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