Dushkina Yuliya
AMM 260.5096
Homework #3.
1. International businesses must deal with the four different types of legal systems:
- Common law is based on the cumulative wisdom of judges' decisions on individual
cases through history;
-Civil law is based on codification, or detailed listing, of what is and is not
permissible;
-Religious law is based on the officially established rules governing the faith and
practice of a particular religion;
- Bureaucratic law is whatever the county's bureaucrats say it is, regardless of the
formal law of the land.
2. Extraterritoriality is a country's attempt to regulate business activities that are
conducted outside its borders.
3. An MNC can affect its host country both positively (FDI, creating local jobs, paying
taxes, technology transfer, raising local standards of living) and negatively (threating
independence of local economy, increasing competition for workers, introducing
products or practices incompatible with the local culture).
4. During expropriation the host government compensates the private owners for their
losses, while during confiscation it offers no compensation.
5. Countries impose restrictions on foreign ownership of domestic firms to avoid having
their economies or key industries controlled by foreigners.
6. “First to invent” system focuses on protecting the rights of the true inventor, while
“first to file” system merely assigns all the rights to the first patent applicant.
7. Restrictions on repatriation of profits inhibit MNC's activity by providing a political
transfer risk.
8. Political risk is any change in the political environment that may adversely affect the
value of a firm's business activities. It can take three forms: ownership risk,
operating risk and transfer risk.
9. Overseas Private Investment Corporation (OPIC) insures U.S. overseas
investments against nationalization, insurrections or revolutions, and foreignexchange inconvertibility, thus reducing the risk of foreign operations for U.S.
companies.