...International Business, 14e (Daniels et al.) Chapter 6 International Trade and Factor-Mobility Theory 1) Which of the following is NOT a reason that international trade theory is useful for managers to understand? A) Countries use trade theories to help them decide how to improve their competitive positions, such as improving the quantity and quality of production factors. B) Countries' trade policies affect whether imports are allowed to compete against domestic production, thus affecting where companies need to produce to serve given markets. C) Countries use laissez-faire policies to intervene in the free movement of international trade, thus affecting where companies can produce most efficiently. D) Countries wrestle with the questions and set policies on what, with whom, and how much they should import and export, thus affecting companies' abilities to produce given products efficiently and sell them into given markets. Answer: C Diff: 3 Learning Outcome: Compare and contrast theories of international trade Skill: Concept Objective: 1 2) Why should managers in international business understand international trade theories? A) Countries' trade policies, based on trade theories, influence which products companies might export to given countries. B) The understanding helps managers decide whether their companies should follow laissez-faire management practices. C) The theories help managers decide whether to use large-scale versus small-scale technologies...
Words: 7502 - Pages: 31
...Chapter 6 Quick Questions: International Trade Theory 1. What is the major benefit of trade identified in theories of international trade? 2. What do theories of international trade teach us about the patter of trade in the world economy? 3. How do trade theories inform government policy? 4. What are the main differences among mercantilism, Adam Smith’s theory of absolute advantage, and David Ricardo’s Theory of comparative advantage? 5. Why is the theory of comparative advantage so important in today’s world? 6. According to the theory of comparative advantage, what is the relationship between free trade and economic growth? Does the empirical evidence support this prediction? 7. What is the criticism that Paul Samuel made of theories that advocate free trade? 8. How is the Heckscher-Olin theory different from the theory of comparative advantage? 9. What is the Leontief paradox? Why is it important? 10. What are the central predictions of the product lifecycle theory? What are the limitations of this theory? 11. What does new trade theory tell us about the patter of trade in the world economy? 12. What are the implications of new trade theory for government policy? 13. According to Porter/s theory of national competitive advantage, what are the elements explain why different countries achieve international success in certain industries? 14. What are the implications of Porter’s Theory for government policy? 15. What are the...
Words: 618 - Pages: 3
...International Trade Theory Chapter Outline OPENING CASE: The Ecuadorian Rose Industry INTRODUCTION AN OVERVIEW OF TRADE THEORY The Benefits of Trade The Pattern of International Trade Trade Theory and Government Policy MERCANTILISM Country Focus: Is China a Neo-Mercantilist Nation? ABSOLUTE ADVANTAGE COMPARATIVE ADVANTAGE The Gains from Trade Qualifications and Assumptions Extensions of the Ricardian Model Country Focus: Moving U.S. White Collar Jobs Offshore HECKSCHER-OHLIN THEORY The Leontief Paradox THE PRODUCT LIFE CYCLE THEORY Evaluating the Product Life Cycle Theory NEW TRADE THEORY Increasing Product Variety and Reducing Costs Economies of Scale, First Mover Advantages and the Pattern of Trade Implications of New Trade Theory NATIONAL COMPETITIVE ADVANTAGE: PORTER’S DIAMOND Factor Endowments Demand Conditions Related and Supporting Industries Firm Strategy, Structure, Rivalry Evaluating Porter’s Theory Management Focus: The Rise of Finland’s Nokia FOCUS ON MANAGERIAL IMPLICATIONS Location First-Mover Advantages Government Policy SUMMARY CRITICAL THINKING AND DISCUSSION QUESTIONS CLOSING CASE: Trade in Information Technology and U.S. Economic Growth Learning Objectives 1. Understand why nations trade with each other. 2. Be familiar with the...
Words: 8280 - Pages: 34
...nations: is Porter’s Diamond Framework a new theory that explains the international competitiveness of countries? A.J. Smit ABSTRACT The focus of this article is to clarify the meaning of international competitiveness at the country level within in the context of Porter’s (1990a) thesis that countries, like companies, compete in international markets for their fair share of the world markets. At a country level, there are two schools of thought on country competitiveness: the economic school, which rejects Porter’s notion of country competitiveness, and the management school, which supports the notion of competitiveness at a country level. This article reviews and contrasts the theories pertaining to these two schools of thought with specific reference to trade theories and the ‘theory’ of the competitive advantage of nations originally advanced by Porter (1990a, 1997a, 1998b, 1998c, 2000). Although Porter’s Diamond Framework has been extensively discussed in the management literature, its actual contribution to the body of knowledge in the economic and management literature has never been clarified. The purpose of this article is to explain why Porter’s Diamond Framework is not a new theory that explains the competitiveness of countries but rather a framework that enhances our understanding of the international competitiveness of firms. Key words: Porter, Diamond Framework, international competition, competitiveness of countries, international business, national competitive advantage...
Words: 11039 - Pages: 45
...International Trade As An Engine of Growth In Developing Countries: a Case Study of Nigeria (1980-2003) SECTION ONE 1.1 INTRODUCTION A ll economies are increasingly open in today’s economic environment of globalization. Trade plays a vital role in shaping economic and social performance and prospects of countries around the world, especially those of developing countries. No country has grown without trade. However, the contribution of trade to development depends a great deal on the context in which it works and the objectives it serves. In recent decades, a number of developing countries, most notably the East Asian newly industrializing countries, have been able to purposefully use the elemental force of trade to boost growth and development within a relatively short time span. At the same time many other developing countries, especially the least developed countries (LDCs), have embarked on unilateral trade liberalization in recent years, with very limited results at best in terms of increased growth and development. To act as an engine of development, trade must lead to steady improvements in human conditions by expanding the range of people’s choice, a notion that the concept of human development 3 tries to capture. From this standpoint, the trade and development performance of a country cannot be seen as the mere sum of its economic growth and export performance. Instead, it is a composite notion, reflecting how trade relates to the range of choices available...
Words: 4611 - Pages: 19
...Contrast liberal and mercantilist theories of international political economy and consider which approach is most apparent in the contemporary world. The following seeks to contrast liberal and mercantilist theories that have developed to describe and analyze the international political economy. Once the contrasts have been made conclusions as to which theory is the most apt or apparent in the contemporary world will be drawn. Both liberal and mercantilist theories have advantages and disadvantages when used to understand the international political economy in the present global system. Perhaps it would be more apt to describe the liberal theory as being neo-liberal as it has undergone a recent revival in popularity. It must be remembered that whether a state is most influenced by liberal or mercantilists theories that trade will never be completely free of duty and tariffs, as they are useful sources of revenue for governments. Governments also have to have relationships with other governments and non-state actors that may or may not share their worldview. Liberalism itself can be dated back to the English, American and French revolutions of the seventeenth and eighteenth centuries, when the mercantilist economic system evolved into capitalism. Liberals were originally regarded as being politically centrist or left wing in outlook but favoring little or no state intervention in the economy. In its original form liberal economic theory strongly advocated a free market...
Words: 1452 - Pages: 6
...International Trade Theories For starters, international trade theories are theories that explain international trade. Since trade is basically the exchanging of goods and/or services between entities or people, then international trade would be the exchanging of goods or services between countries. International trade happens in an effort to benefit the countries involved, in some way. According to the U.S. Chamber of Commerce, “America cannot have a growing economy or life wages and incomes of our citizens unless we continue to reach beyond our borders and sell products, produce, and services to the 95% of the world’s population that lives outside the United States. More than 38 million Americans jobs depends on trade.” (U.S. Chamber of Commerce). This paper will address different international trade theories, specifically mercantilism, absolute advantage, comparative advantage and balance of trade, to give a better understanding of international trade as well as why the government gets involved, how this may impact our company and why managers of international businesses should know these theories. “Mercantilism is a trade theory holding that a country’s wealth is measured by its holdings of ‘treasure,’ which usually means its gold.” (Daniels, Radebaugh & Sullivan, 2011 pg. 219). This theory states that countries should export (get others to buy from you) more goods and/or services than they import (others selling to you) in order to receive payment (gold) from other...
Words: 1298 - Pages: 6
...What is the major benefit of trade identified in the theories of international trade? 2. What do theories of international trade teach us about the pattern of trade in the world economy? 3. 6 4. What are the main differences among mercantilism, Adam Smith’s theory of absolute advantage, and David Ricardo’s theory of comparative advantage? 5. Why is the theory of comparative advantage so important in today’s world? 6. According to the theory of comparative advantage, what is the relationship between free trade and economic growth? Does the empirical evidence support this prediction? 7. What is the criticism that Paul Samuelson made of theories that advocate free trade? 8. How is the Heckscher- Ohlin theory different from the theory of comparative advantage? 9. What is the Leontief paradox? Why is it important? 10. What are central predictions of the product life- cycle theory? What are the limitations of this theory? 11. What does new trade theory tell us about the pattern of trade in the world economy? 12. What are the implications of new trade theory for government policy? 13. According to Porter’s theory of national competitive advantage, what elements explain why different countries achieve international success in certain industries? 14. What are the implications of Porter’s theory for government policy? 15. What are the implications of theories of international trade such as the theory of comparative advantage for the...
Words: 371 - Pages: 2
...International Economics, 9e (Krugman et al.) Chapter 1 Introduction 1.1 What Is International Economics About? 1) Historians of economic thought often describe ________ written by ________ and published in ________ as the first real exposition of an economic model. A) "Of the Balance of Trade," David Hume, 1776 B) "Wealth of Nations," David Hume, 1758 C) "Wealth of Nations," Adam Smith, 1758 D) "Wealth of Nations," Adam Smith, 1776 E) "Of the Balance of Trade," David Hume, 1758 Answer: E Page Ref: 1 Difficulty: Easy Question Status: New 2) From 1960 to 2009, A) the U.S. economy roughly tripled in size. B) U.S. imports roughly tripled in size. C) the share of US Trade in the economy roughly tripled in size. D) U.S. Imports roughly tripled as compared to U.S. exports. E) U.S. exports roughly tripled in size. Answer: C Page Ref: 1 Difficulty: Easy Question Status: New AACSB Codes: Dynamics of the Global Economy 3) The United States is less dependent on trade than most other countries because A) the United States is a relatively large country with diverse resources. B) the United States is a "Superpower." C) the military power of the United States makes it less dependent on anything. D) the United States invests in many other countries. E) many countries invest in the United States. Answer: A Page Ref: 2 Difficulty: Easy Question Status: New AACSB Codes: Dynamics of the Global Economy 4) Ancient theories of international...
Words: 2790 - Pages: 12
...I. INTRODUCTION The international trade theory experienced several periods of development from Classical to Neoclassical, New Trade Theory, and then the New Classical Trade Theory. The earliest over international trade had its birth in the end of 15th century and initial period of 16th century. That is, during the period of western countries’ primitive accumulation of capital and the main theory is mercantilism. It is claimed of the theory that the only form of wealth is the metal---gold and silver. People can gain them though exchange and for a nation, it is to increase the social wealth. Hereby, the way to gain gold and silver is international trade. II. THE DEVELOPMENT PROCESS OF THE THEORIES: 1. CLASSICAL INTERNATIONAL TRADE THEORY In the late 1790s, the point of mercantilism was challenged by the classical economists. Based on criticizing the mercantilism, Adam Smith proposed the division of labor theory. It has been 41 years from Adam Smith proposed the absolute cost in his the Wealth of Nations in 1976 to David Ricardo proposed the comparative cost in his the Principles of Political Economy and Taxation in 1817. This is the foundation period of international trade theory, that is, the Classical period. The absolute cost of Adam Smith is based on the division of labor theory. Adam introduced the division of labor theory to the field of international trade and established his absolute cost theory, thus demonstrating the fact that a nation can make the sources of each...
Words: 1878 - Pages: 8
...discuss the most relevant old and new trade theories and all its components. Once they are presented, Integration may arise not only as a key concept but as one of the ultimate goals of international trade. Integration should be described and analysed not only theoretically but with the European case as framework. Finally, the conclusion may be presented showing all the benefits and drawbacks of integration. Table of contents Introduction 1 Analysis 2 Conclusion 9 Bibliography 11 Appendix 13 Introduction The aim of this project is to present, characterize, examine and analyse the nature and sense of the European integration. In order to achieve it some of the most important trade theories will be presented. Not only the classic ones but also some of the more recent ones, which will allow the analysis to fundament and give an accurate background to the idea of integration and all its components. The study should be focalized into the old classical trade theories of Absolute and Comparative Advantages, the Heckscher-Ohlin model and its Samuelson variation. Then, some of the newest classical trade theories such as the New Trade theory and the International Product Life Cycle theory will be discussed. Finally, it will be mentioned one new contemporary trade theory made by Michael Porter´s referring to the national competitive advantages. The main intention of presenting those theories is to have the proper theoretic framework...
Words: 6125 - Pages: 25
...IBUS 410- Midterm Review Globalization * Definition: interdependent, integrate * Production- factors of production- land labor capital * Endowment theory * Lower overall cost * Markets- merging markets * Economies of scale * Institutions * Drivers- decline in barriers, tech changes * Implications: * Lower barriers: optimal location * Tech changes: lower costs * 4 trends in changing demographics * MNE- types of companies involved * Democratic politics, free market economies The World Is: * Prusak- distinguish information from knowledge (difference) * IMPORTANT- the issue of access to info- but no knowledge * Ghemawat- 10% presumption, factors of time zones, languages, proximity shows that distance does matter, the world isn’t flat Opportunities & Challenges of globalization for managers * Differences of managing international vs. domestic * Boeing: benefits of globalization maximize efficiency of production but actually caused problems; lack of planning, communication, not simple for this industry (knowledge intensive industry) better for in house Localization * Standardization is ending, consumers are diverse- customization for local * Data analysis & innovation * Centralized vs localized * SWOT analysis National Differences * Political economy- system of gov. Political, economic & legal influence each other. Collective vs individualism ...
Words: 669 - Pages: 3
...in, controlling, and managing value-added activities in other countries. Global Business Business around the globe. Globalization The close integration of countries and peoples of the world. Gross domestic product (GDP) The sum of value added by resident firms, households, and governments operating in an economy. Gross national income (GNI) GDP plus income from non-resident sources abroad. The term used by the World Bank and other international organizations to supersede the term GNP. Gross national product (GNP) GDP plus income from non-resident sources abroad Group of 20 (G-20) The group of 19 major countries plus the European Union (EU) whose leaders meet on a biannual basis to solve global economic problems. International business (IB) (1) A business (or firm) that engages in international (crossborder) economic activities and/or (2) the action of doing business abroad. International premium A significant pay raise when working overseas. Liability of foreignness The inherent disadvantage that foreign firms experience in host countries because of their non-native status. Multinational enterprise (MNE) A firm that engages in foreign direct investment (FDI). Nongovernmental organization (NGO) An organization that is not...
Words: 2493 - Pages: 10
...ECO 305 WK 4 ASSIGNMENT 1 INTERNATIONAL ECONOMICS To purchase this visit here: http://www.activitymode.com/product/eco-305-wk-4-assignment-1-international-economics/ Contact us at: SUPPORT@ACTIVITYMODE.COM ECO 305 WK 4 ASSIGNMENT 1 INTERNATIONAL ECONOMICS ECO 305 WK 4 Assignment 1 - International economics Part 1 Write a 4-6 page paper in which you: 1. Explain the concept of comparative advantage and the principle theories of why trade occurs. 2. Analyze and discuss the sources of comparative advantage in national economies. 3. Analyze the international movement of productive factors in order to identify business opportunities and/or threats. 4. Explain the economic effect of tariffs, nontariff barriers, and various forms of trade policies adopted by national governments. Activity mode aims to provide quality study notes and tutorials to the students of ECO 305 WK 4 Assignment 1 International economics in order to ace their studies. ECO 305 WK 4 ASSIGNMENT 1 INTERNATIONAL ECONOMICS To purchase this visit here: http://www.activitymode.com/product/eco-305-wk-4-assignment-1-international-economics/ Contact us at: SUPPORT@ACTIVITYMODE.COM ECO 305 WK 4 ASSIGNMENT 1 INTERNATIONAL ECONOMICS ECO 305 WK 4 Assignment 1 - International economics Part 1 Write a 4-6 page paper in which you: 1. Explain the concept of comparative advantage and the principle theories of why trade occurs. 2. Analyze and discuss the sources of comparative advantage in national economies...
Words: 901 - Pages: 4
...Vietnam National University – HCMC International University SCHOOL OF BUSINESS ADMINISTRATION COURSE SYLLABUS[?] BA121IU International Economics Note: The outline with specific venue and time, and updated learning materials for the current semester will be provided to the enrolled students by the lecturer 1. COURSE STAFF Lecturer: Ho Nhut Quang. Ph.D Room: A.401 Telephone: 0903339767 E-mail: hnquang@hcmiu.edu.vn Consultation Hours: 13h.00- Mondays - Thursdays Teaching Assistant: TBA Room: TBA Telephone: TBA E-mail: TBA Consultation Hours: TBA Should the students wish to meet the staff outside the consultation hours, they are advised to make appointment in advance. 2. COURSE INFORMATION 2.1 Teaching times and Locations Lecture: TBA Venue: TBA 2.2 Units of Credit This course is worth 3 credits. 2.3 Parallel teaching in the course There is no parallel teaching involved in this course. 2.4 Relationship of this course to others The International Trade course focuses on two main parts. The first part deals with international trade theories and policies among countries. And the second part mentions the problems international monetary. Both parts utilize many concepts and knowledge from the courses of Microeconomics and Macroeconomics. Theoretical analysis will be based on the demand and supply model, the concepts of consumer...
Words: 2250 - Pages: 9
