Question

Most Japanese MNE's, for instance, begin their international expansion with ___ investment because they believe that it enables the sharing of experience, resources, and knowledge already developed at home, thus reducing risk.

a) Vertical FDI
b) Horizontal FDI
c) Conglomerate FDI
d) None of the above

Answer 1

Japanese MNEs typically begin their international expansion with horizontal FDI to leverage existing resources and knowledge, thereby reducing risk.

Step-by-step explanation:

Most Japanese Multinational Enterprises (MNEs) tend to begin their international expansion with horizontal foreign direct investment (FDI). Horizontal FDI includes the acquisition or construction of a similar type of business operation in a foreign country as they already have at home. For instance, a Japanese automobile manufacturer building a plant in the United States is making a horizontal FDI. This approach to foreign investment is believed to facilitate the sharing of experience, resources, and knowledge already developed in their home country, thus reducing risk. Whereas vertical FDI would involve different stages of production in different countries, and conglomerate FDI would mean diversifying into unrelated business activities abroad.