English Quiz

Directions for (Q1. to Q10.): Read the following passage carefully and answer the questions given below it. Certain words/phrases have been given in bold to help you locate them while answering some of the questions.

The long-term trend of an increasing share of service sector FDI has accelerated over the last twenty years. Nevertheless, empirical research on FDI is still concentrated on manufacturing. As the basic characteristics of services and goods differ – the main specifics of services are intangibility, inseparability of production and consumption, heterogeneity, perishability and restricted ownership one would expect that the determinants of internationalisation are not the same in the two sectors. This may hold true although the separation line between goods and services has become quite blurred reflecting the growing service content of manufacturing and a certain tendency towards the industrialisation of parts of the service sector. Against this background, it is surprising that firm-level econometric research dealing with the inter nationalisation of service firms by way of FDI is scarce. Particularly, only few studies cover the whole service sector, and there is hardly any empirical work investigating systematically the differences between manufacturing and services.

The analysis of the internationalisation of services companies is dominated until now by studies for specific industries. To mention are, in particular, financial services, ICT/software, the hotel industry, business services and retail trade. The majority of contributions are case studies or small-sample descriptive analyses focusing on one or very few service industries. Econometric studies dealing at firm level with specific service industries became available, with some exceptions, only in recent years. The concentration on industry-specific studies may be due to the absence of (large scale) datasets covering the whole service sector as is already pointed out in some earlier review articles. Another reason may be the presumption that the service sector is particularly heterogeneous as advocated, for example, by Dunning who argues that type and combination are integral to the service sector.

The present study contributes to filling this research gap by identifying and comparing for the two sectors (a) the drivers of the internationalisation of firm activity in terms of exports and FDI, and (b) the determinants of the choice among specific forms of FDI in terms of business functions. As mentioned, there is little evidence from econometric studies with respect to the first topic, and the second one, to the best of our knowledge, has never been investigated at all. In order to analyse these problems we formulate two empirical models using the well-known OLI paradigm as theoretical framework.

The present analysis is an extension of Hollenstein, who estimated, using data for 1998, OLI-based models that are structurally similar to model I and II but did so only for the entire business sector. The present research also goes beyond who disaggregated the business sector in manufacturing and services and estimated a model comparable to our model I which distinguishes between “exporting only” and “direct foreign presence”. However, this author did not further differentiate within the category of firms with FDI as we do in model II. The paper is based on a large dataset containing information from 1921 companies of the Swiss business sector that responded to a comprehensive survey we conducted in 2010 among a random sample drawn from the official enterprise census of 2008. The available data allow a rich specification of the explanatory part of the two models. By estimating model I and II we are able to significantly add to previous evidence on the differences between manufacturing and service companies with respect to the determinants of international activities – a topic strongly neglected in empirical research. In line with our hypotheses, we find, for both sectors, that an OLI-based model is well suited not only for explaining the propensity of firms to go international by means of exports and/or FDI (model I) but also differences between specific forms of FDI in terms of business functions (model II). In all models, the explanatory power of the OLI approach is stronger for manufacturing than for services. The results for manufacturing are in line with the stages view of internationalization, what is only partly the case for the services sector.

As early as in the 1970s, Dunning argued that no single approach is able to explain a firm’s international activities. He proposed an eclectic theory of international production, the well-known OLI paradigm, which he further developed over the years to account for changing features of the international economy and new theoretical approaches. In the most recent version the OLI model applies not only to international production but also to other business functions. In addition, it emphasizes the strategic aspects of internationalization more explicitly by drawing on the “resource-based” or “dynamic capability” view of the firm, or the concept of the “knowledge-based company”.

Q1. According to the author, what dominates the examination of the internationalization of services companies?
1. Studies for specific industries
2. Studies for every industry
3. Studies for agro-based industry
4. Studies for automobile industry
5. Studies for textile industry

Q2. According to the author, empirical research on FDI is focused on
1. Equities
2. Foreign exchange
3. Manufacturing
4. Agriculture
5. None of the above

Q3. What did Dunning propose in the 1970s?
1. A theory that revolves around the export industry
2. A theory that revolves around the international activities of Swiss companies
3. A unilateral theory of international production
4. A heterogeneous theory of international production
5. Both 1 and 2

Q4. What is the tone of the author in the passage?
1. Diffusive
2. Detailed
3. Meandering
4. Wandering
5. Discursive

Q5. According to the author, when did econometric studies become available?
1. In the 1980s
2. In the early years of this century
3. In the first decade of this century
4. In the recent past
5. In the 1990s

Q6. Choose the word which is most similar in meaning to the word given in bold as used in the passage.

PROPENSITY
1. Expository
2. Cursory
3. Proclivity
4. Indignation
5. Discrete

Q7. Choose the word which is most similar in meaning to the word given in bold as used in the passage.

ECLECTIC
1. Pursuit
2. Handiwork
3. Cross-disciplinary
4. Unitary
5. Readily

Q8. Choose the word which is most similar in meaning to the word given in bold as used in the passage.

PARADIGM
1. Catholic
2. Diverse
3. Liberal
4. Archetype
5. Universal

Q9. Choose the word which is opposite in meaning to the word given in bold as used in the passage.

THEORETICAL
1. Metaphysical
2. Experimental
3. Abstract
4. Philosophical
5. Terrestrial

Q10. Choose the word which is opposite in meaning to the word given in bold as used in the passage.

EMPIRICAL
1. Conjectural
2. Experiential
3. Observational
4. Employable
5. Acumen

Answers:

Q1 – 1
Q2 – 3
Q3 – 4
Q4 – 2
Q5 – 4
Q6 – 3
Q7 – 3
Q8 – 4
Q9 – 2
Q10 – 1