Exon-Florio amendment:

A measure attached to the 1988 Trade Act to provide a means of monitoring foreign direct investment in the United States. The amendment authorizes the president to block mergers and joint ventures with, or acquisitions or takeovers of US companies by foreign interest, on national security grounds.

Expatriate failure:

Early return of an expatriate manager to his or her home country because of inability to perform in the overseas assignment.

Expatriate manager

A national of one country appointed to a management position in another country.

Expatriates:

Collective name for parent-country nationals (PCNs) and third-country nationals (TCNs).

Experience curve

Systematic production cost reductions that occur over the life of a product.

Experience curve pricing

Aggressive pricing designed to increase volume and help the firm realize experience curve economies.

Export and Import brokers:

Agents who bring together international buyers and sellers of standardized commodities such as coffee, cocoa, and grains.

Export management company (EMC):

Firm that acts as its clients' export department.

Export of the services of capital:

Income that a country's residents earn from their foreign investments.

Export promotion:

Economic development strategy based on building a vibrant manufacturing sector by stimulating exports, often by harnessing some advantage the country possesses, such as low labor costs.

Export tariff:

Tax levied on goods as they leave the country.

Export trading company (ETC):

Firm that may engage in various cooperative exporting practices without fear of violating U.S. antitrust laws.

Export-Import Bank (Eximbank)

Agency of the U.S. government whose mission is to provide aid in financing and facilitate exports and imports.

Export-Import Bank of the United States (Eximbank):

U.S. government agency that promotes U.S. exports by offering direct loans and loan guarantees.

Exporting

Sale of products produced in one country to residents of another country.

Exporting:

Selling products made in one's own country for use or resale in other countries.

Export-promotion strategy:

See export promotion.

Exports

The goods and services sold to citizens of another country plus the services furnished to the citizens of the foreign country in shipping, financing, and otherwise facilitating the export.

Expropriation:

Involuntary transfer of property, with compensation, from a privately owned firm to a host country government.

Externalities

Economically, externalities are costs or benefits not taken into account in a transaction or system of transactions.

Externality:

The partial cost or benefit of a transaction that is borne not by the producer or consumer of goods and services, but by other members of society, leading to a market failure.

Externally convertible currency

Nonresidents can convert their holdings of domestic currency into foreign currency, but the ability of residents to convert the currency is in some way limited.

Extraterritoriality:

Application of a country's laws to activities occur-ring outside its borders.

Factor endowments

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A country's endowment with resources such as land, labor, and capital.

Factor of production:

Economic resources that go into the production of goods.

Factoring:

Specialized international lending activity in which firms buy foreign accounts receivable at a discount from face value.

Factors of production

Inputs into the productive process of a firm, including labor, management, land, capital, and technological know-how.

Fair trade:

Trade between nations that takes place under active government intervention to ensure that the companies of each nation receive their fair share of the economic benefits of trade; also called managed trade.

Family and Medical Leave Act of 1993

Federal legislation granting the right of unpaid leave to employed persons confronting emergencies of family care.

Family Support Act of 1988

Sweeping federal legislation designed to support families in the administration of welfare programs, including attaching the wages of "deadbeat dads" and permitting experimental changes by states in merging welfare programs with employment and training programs.

Fast-track procedures:

Legislative procedures set forth in Section 151 of the Trade Act of 1974, stipulating that once the president formally submits to Congress a bill implementing an agreement (negotiated under the act's authority) concerning non-tariff barriers to trade, both houses must vote on the bill within 90 days. No amendments are permitted. The purpose of these procedures is to assure foreign governments that Congress will act expeditiously on an agreement they negotiate with the US government. The deadline for negotiations under the fast-track procedures was extended until 1991 by the 1988 Trade Act, and then (with congressional acquiescence) until 30 June 1993. The deadline for Uruguay Round negotiations was subsequently extended to 16 April 1994. There was no extension of fast-track authority in the Uruguay Round implementing legislation.

Federal Aviation Administration (FAA)

A federal administration housed within the Department of Transportation whose primary mission is to regulate air commerce in ways that best promote its development and safety.

Federal Bureau of Investigations (FBI)

As principle investigative arm or the U.S. Department of Justice, the FBI is charged with gathering and reporting facts, locating witnesses, and compiling evidence in matters in which the federal government is, or may be, a party of interest.

Federal Communications Commission (FCC)

Federal agency that regulates interstate and foreign communications by radio, television, wire, and cable.

Federal Deposit Insurance Corporation (FDIC)

Federal body established to promote and preserve public confidence in banks and to protect the money supply through the provision of insurance coverage for bank deposits.

Federal Emergency Management Agency (FEMA)

Federal agency that is accountable for emergency preparedness and response for all levels of government and for all types of emergencies (natural, manmade, and nuclear).

Federal Energy Regulatory Commission

An independent five-member commission within the Department of Energy that sets the rates and charges for the transportation and sale of natural gas and electricity, and oversees the licensing of hydroelectric projects.

Federal Home Loan Bank Board

Federal body that supervises and regulates savings and loan organizations.

Federal Maritime Commission

Federal agency that regulates the waterborne foreign and domestic offshore commerce of the United States, assures that U.S. international trade is open to all nations on fair and equitable terms, and guards against unauthorized monopoly in the waterborne commerce of the United States.

Federal Reserve System

The central bank of the United States charged with administering and making policy for the nation's credit and monetary affairs. The system includes twelve Federal reserve Banks, 25 branches, and several committees.

Federal Savings & Loan Insurance Corporation (FSLIC)

Run by the Federal Home Loan Bank Board, the FSLIC protects the savings of Americans with savings accounts in FSLIC-insured savings and loan associations.

Federal Trade Commission (FTC)

An independent federal agency run by a five-member commission that is charged by Congress with preventing unfair and deceptive business activities and monopoly practices that inhibit competition.

Federalism

A mode of political organization that divides power among general and constituent governments in a manner designed to protect the existence and authority of both national and subnational political systems, such as states, enabling all to share in a decision-making and policy execution.

Fiduciary:

A person having a legal duty to act primarily for another's benefit.

Filibuster:

The use of stalling tactics to keep debate alive and block final action on a bill in the U.S. Senate.

Financial Accounting Standards Board (FASB)

The body that writes the generally accepted accounting principles by which the financial statements of U.S. firms must be prepared.

Financial alliance:

Strategic alliance in which two or more firms work together to reduce the financial risks associated with a project.

Financial derivative:

Financial instrument whose return derives from some bond, stock, or other asset.

Financial structure

Mix of debt and equity used to finance a business.

First-mover advantage:

Competitive advantage gained by the first firm to enter a market, develop a product, introduce a technology, etc.

First-mover advantages

Advantages accruing to the first to enter a market.

Fiscal policy

The portion of government policy concerned with raising revenue through taxation and other means and deciding on the level and pattern of expenditure. Through this policy the government has some control over the level of aggregate demand in the economy and, thus, over the rate of new job creation and, to some extent, the rate of inflation.

Fiscal policy:

The use of taxes and government spending to stabilize the economy.

Fisher effect

Nominal interest rates (i) in each country equal the required real rate of interest (r) and the expected rate of inflation over the period of time for which the funds are to be lent (1). That is, I = r + 1.

Fixed exchange rates

A system under which the exchange rate for converting one currency into another is fixed.

Fixed exchange-rate system:

International monetary system in which each government promises to maintain the price of its currency in terms of other currencies.

Fixed-rate bond

Offers a fixed set of cash payoffs each year until maturity, when the investor also receives the face value of the bond in cash.

Flexible (or floating) exchange-rate systems:

System in which exchange rates are determined by supply and demand.

Flexible manufacturing technologies

Manufacturing technologies designed to improve job scheduling, reduce setup time, and improve quality control.

Flight capital:

Money sent out of politically or economically unstable countries by investors seeking a safe haven for their assets.

Float:

To allow a currency's value to be determined by forces of supply and demand.

Floating exchange rates

A system under which the exchange rate for converting one currency into another is continuously adjusted depending on the laws of supply and demand.

Flow of foreign direct investment

The amount of foreign direct investment undertaken over a given time period (normally one year).

Focus strategy:

Business-level strategy targeting specific types of products for certain customer groups or regions.

Folkways

Routine conventions of everyday life.

Food and drug Administration (FDA)

The federal agency that aims to protect the health of U.S. citizens against impure and unsafe foods, drugs, and cosmetics.

Foreign bonds

Bonds sold outside the borrower's country and denominated in the currency of the country in which they are issued.

Foreign bonds:

Bonds issued by residents of one country to residents of a second country and denominated in the second country's currency.

Foreign Corrupt Practices Act (FCPA):

U.S. law enacted in 1977 prohibiting U.S. firms their employees, and agents acting on their behalf from paying or offering to pay foreign government officials in order to influence official actions or policies or to gain or retain business.

Foreign direct investment (FDI)

Direct investment in business operations in a foreign country.

Foreign direct investment (FDI):

Acquisition of foreign assets for the purpose of controlling them; under U.S. regulations, FDI occurs when an investor owns at least 10 percent of the voting stock of a foreign company.

Foreign exchange market

A market for converting the currency of one country into that of another country.

Foreign exchange risk

The risk that changes in exchange rates will adversely affect the profitability of a business deal.

Foreign exchange:

Currencies issued by countries other than one's own.

Foreign portfolio investment (FPI)

Investments by individuals, firms, or public bodies (e.g., national and local governments) in foreign financial instruments (e.g., government bonds, foreign stocks).

Foreign sales corporation (FSC):

Subsidiary of a U.S. MNC that enjoys substantial income tax savings from profits earned from exporting activities.

Foreign service premium:

See hardship premium.

Foreign Sovereign Immunities Act of 1976:

U.S. law that limits the ability of U.S. citizens to sue foreign governments in U.S. courts.

Foreign trade zone (FTZ):

Geographical area in which imported or exported goods receive preferential tariff treatment.

Forum shopping:

Attempt to seek a court system or judge that will be most sympathetic to an attorney's client.

Forward discount:

Difference between the forward and the spot price of a currency expressed as an annualized percentage (assumes the forward price is less than the spot price) (see also forward premium).

Forward exchange

When two parties agree to exchange currency and execute a deal at some specific date in the future.

Forward exchange rate

The exchange rates governing forward exchange transactions.

Forward market:

Market for foreign exchange involving delivery of currency at some point in the future.

Forward premium:

Difference between the forward and the spot price of currency expressed as an annualized percentage (assumes the forward price is more than the spot price) (see also forward discount).

Franchisee:

Independent entrepreneur or organization that operates a business under the name of another.

Franchising:

Special form of licensing allowing the licensor more control over the licensee while also providing more support from the licensor to the licensee.

Franchisor:

Firm that allows an independent entrepreneur or organization to operate a business under its name.

Free-alongside-ship (f.a.s.):

A contractual basis for trade by which the seller delivers goods to the buyer at the port of embarkation and the buyer assumes responsibility thereafter; hence, a method of valuing internationally traded goods that does not include the cost of their shipment from the exporting to the importing country.

Free riding:

The tendency of consumers to understate a preference for a public good and to consume the good without paying the full price for it.

Free trade

The absence of barriers to the free flow of goods and services between countries.

Free trade:

Trade between nations that is unrestricted by governmental actions.

Free trade:

The elimination of impediments to foreign trade so that goods, services, and capital can travel unchecked across international borders.

Free trade agreement:

An arrangement between two or more nations to remove barriers to the trade they conduct with one another. An FTA also usually addresses trade-distorting practices such as government subsidies. Under such an agreement, concessions are not on an MFN (most-favored nation) basis, but only to the parties to the FTA. Since such agreements were authorized by the Trade and Tariff Act of 1984, the United States has negotiated FTAs with Israel and Canada, and a North American Free Trade Agreement (NAFTA) with Canada and Mexico.

Free trade area

A group of countries committed to removing all barriers to the free flow of goods and services between each other, but pursuing independent external trade policies.

Free trade area:

Regional trading bloc that encourages trade by eliminating trade barriers among its members.

Freely convertible currency

A country's currency is freely convertible when the government of that country allows both residents and nonresidents to purchase unlimited amounts of foreign currency with the domestic currency.

Freight forwarders:

Agents who specialize in the physical transportation of goods, arranging customs documentation and obtaining transportation services for their clients.

Frictional employment

Unemployment resulting from the time lags involved in the redeployment of labor.

Fronting loans

A loan between a parent company and a foreign subsidiary that is channeled through a financial intermediary.

Full employment

An economic situation in which all those who want to work are able to find employment. Full employment levels usually entail unemployment rates between 3 to 6 percent, since frictional unemployment and structural unemployment (see Below) always exist.

Full Employment Act of 1946

An Act of the U.S. Congress that mandated the government to use all practicable means to achieve maximum employment; production, and purchasing power. Created the Council of Economic Advisors.

Functional currency:

Currency of the principal economic environment in which a subsidiary operates.

Functional representation:

Representation of society's functions (such as labor and management)through public institutions.

G.I. Bill

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Serviceman's Readjustment Act of 1944 that pays for college education for returning veterans.

Gains from trade

The economic gains to a country from engaging in international trade.

GATT (General Agreement on Tariffs and Trade):

An international code of trading rules, signed in 1947, that promotes freer trade.

GDP/GNP:

The value of all goods and services produced for sale in a nation in a year. (GDP excludes investment income from abroad.)

General Agreement on Tariffs and Trade (GATT)

A multilateral trade agreement containing guidelines for conduct of international trade based on three basic principles: nondiscriminatory treatment of all signatories in trade matters; eventual elimination of tariff and nontariff barriers to trade; and resolution through consultation of conflicts or damages arising from trade actions of another signatory.

General Agreement on Tariffs and Trade (GATT)

International treaty that committed signatories to lowering barriers to the free flow of goods across national borders led to the WTO.

General Agreement on Tariffs and Trade (GATT):

Early postwar multilateral agreement on trade rules, completed in 1947 as an interim arrangement pending establishment of the projected International Trade Organization (ITO). After Congress failed to ratify the ITO agreement, the articles of the GATT agreement became the basic rules of international trade, and the GATT organization at Geneva the central international institution supporting international negotiations and the reduction of trade barriers. As part of the Uruguay Round agreement, the GATT was superseded by the World Trade Organization (WTO) on 1 January 1995, with all bodies and rules of the GATT as modified by the Uruguay Round agreements becoming part of the WTO.

General Agreement on Tariffs and Trade (GATT):

International organization that sponsors negotiations to promote world trade.

General sales tax:

A tax levied on retail sales.

Generalized System of Preference (GSP):

A system under which industrial nations give preferential rates of duty on imports from less developed countries without receiving trade concessions in return. The United States began extending preferences in 1975, and renewed them in the Trade and Tariff Act of 1984.

Generalized System of Preference (GSP):

System of reduced tariff rates offered on goods exported from developing countries.

Generic organizational control:

Form of organizational control based on centralized generic controls across the entire organization.

Geocentric approach:

Management approach in which a firm analyzes the needs of its customers worldwide and then adopts standardized operating practices for all markets it serves.

Geocentric staffing model:

Approach using a mix of PCNs, HCNs, and TCNs to staff upper-level foreign positions.

Geographic arbitrage:

See two-point arbitrage.

Gephardt amendment:

Authored by Representative Richard A. Gephardt (D-MO), this legislation threatened retaliation against countries running large trade deficits with the United States. Initially passed by the House in 1986 and 1987, it was supplanted, in the 1988 act, by Super 301. The congressman, as House majority leader, introduced a "new Gephardt amendment" in 1991 targeted mainly at Japan.

Gerrymander

The intentional design of political boundaries of noncontiguous districts to ensure that a majority of a given political party exists within the boundary.

Global area design:

Form of organization design that centers a firm's activities around specific areas or regions of the world.

Global bonds:

Large, liquid bond issues designed to be traded in numerous capital markets.

Global Corporation:

Organization that views the world as a single marketplace and strives to create standardized goods and services to meet the needs of customers worldwide.

Global customer design:

Form of organization design centered around different customers or customer groups, each requiring special expertise or attention.

Global matrix design:

Complex form of international organization design created by superimposing one form of design on top of an existing different form.

Global matrix structure

Horizontal differentiation proceeds along two dimensions: product divisions and areas.

Global product design:

Form of organization design that assigns worldwide responsibility for specific products or product groups to separate operating divisions within a firm.

Global strategy

Strategy focusing on increasing profitability by reaping the cost reductions from experience curve and location economies.

Globalization of markets

Moving away from an economic system in which national markets are distinct entities, isolated by trade barriers and barriers of distance, time and culture toward a system in which national markets are merging into one global market.

Globalization of production

Trend by individual firms to disperse parts of their productive processes to different locations around the globe to take advantage of differences in cost and quality of factors of production.

Globalization:

The trend toward greater integration of the world's markets.

Goal orientation:

Cultural beliefs about motivation and the different goals toward which people work.

Goals 2000

Federal strategy of education reform passed by the Educate America Act of 1994 that aims to create a "World-Class Education for Every Child" through a series of goals and standards.

Geocentric staffing

A staffing policy where the best people are sought for key jobs throughout an MNE, regardless of nationality.

Gold par value

The amount of currency needed to purchase one ounce of gold.

Gold standard:

International monetary system based on the willingness of countries to buy or sell their paper currencies for gold at a fixed rate.

Golden parachute:

A contract by which a company agrees to make a payment to key officers should control of the company change hands.

Goodwill:

Payment in excess of the book value of a firm's stock.

Government

A social institution empowered to make decisions for a whole society or community.

Government failure:

The inability of a government intervention in the economy to provide a socially desirable outcome.