【正文】 prises were in dire need of capital injections for petitive survival. Crossborder acquisitions are not, however, without their pitfalls. As with all acquisitions—domestic or international—there are the frequent problems of paying too high a price or suffering a method of financing that is too costly. Meshing different corporate cultures can be traumatic. Managing the postacquisition process is frequently characterized by downsizing to gain economies of scale and scope in overhead functions. This results in nonproductive impacts on the firm as individuals attempt to save their own jobs. Internationally, additional difficulties arise from host governments intervening in pricing, financing, employment guarantees, market segmentation, and general nationalism and favoritism. In fact, the ability to plete international acquisitions successfully may itself be a test of the MNE’s petence in the twentyfirst century.1815. CrossBorder Strategic Alliance. The term “crossborder strategic alliance” conveys different meanings to different observers. What are the meanings? The term strategic alliance conveys different meanings to different observers. In one form of crossborder strategic alliance, two firms exchange a share of ownership with one another. A strategic alliance can be a takeover defense if the prime purpose is for a firm to place some of its stock in stable and friendly hands. If that is all that occurs, it is just another form of portfolio investment. In a more prehensive strategic alliance, in addition to exchanging stock, the partners establish a separate joint venture to develop and manufacture a product or service. Numerous examples of such strategic alliances can be found in the automotive, electronics, telemunications, and aircraft industries. Such alliances are particularly suited to hightech industries where the cost of research and development is high and timely introduction of improvements is important. A third level of cooperation might include joint marketing and servicing agreements in which each partner represents the other in certain markets. Some observers believe such arrangements begin to resemble the cartels prevalent in the 1920s and 1930s. Because they reduce petition, cartels have been banned by international agreements and many national laws.1816. Governance Risk.a. Define what is meant by the term “governance risk.” Governance risk is the ability to exercise effective control over an MNE’s operations within a country’s legal and political environment. For an MNE, however, governance is a subject similar in structure to consolidated profitability—it must be addressed for the individual business unit and subsidiary, as well as for the MNE as a whole. b. What is the most important type of governance risk? The most important type of governance risk for the MNE on the subsidiary level arises from a goal conflict between bona fide objectives of host governments and the private firms operating within their spheres of influence. Governments are normally responsive to a constituency consisting of their citizens. Firms are responsive to a constituency consisting of their owners and other stakeholders. The valid needs of these two separate sets of constituents need not be the same, but governments set the rules. Consequently, governments impose constraints on the activities of private firms as part of their normal administrative and legislative functioning. 1817. Investment Agreement. An investment agreement spells out specific rights and responsibilities of both the foreign firm and the host government. What are the main financial policies that should be included in an investment agreement? An investment agreement spells out specific rights and responsibilities of both the foreign firm and the host government. The presence of MNEs is as often sought by developmentseeking host governments as a particular foreign location sought by an MNE. All parties have alternatives and so bargaining is appropriate. An investment agreement should spell out policies on financial and managerial issues, including the following: The basis on which fund flows, such as dividends, management fees, royalties, patent fees, and loan repayments, may be remitted. The basis for setting transfer prices. The right to export to thirdcountry markets. Obligations to build, or fund, social and economic overhead projects, such as schools, hospitals, and retirement systems. Methods of taxation, including the rate, the type of taxation, and means by which the rate base is determined. Access to hostcountry capital markets, particularly for longterm borrowing. Permission for 100% foreign ownership versus required local ownership (joint venture) participation. Price controls, if any, applicable to sales in the hostcountry markets. Requirements for local sourcing versus import of raw materials and ponents. Permission to use expatriate managerial and technical personnel, and to bring them and their personal possessions into the country free of exorbitant charges or import duties. Provision for arbitration of disputes. Provisions for planned divestment, should such be required, indicating how the going concern will be valued and to whom it will be sold. 1818. Investment Insurance and Guarantees (OPIC).a. What is OPIC? The . investment insurance and guarantee program is managed by the governmentowned Overseas Private Investment Corporation (OPIC). OPIC’s stated purpose is to mobilize and facilitate the participation of . private capital and skills in the economic and social progress of less developed friendly countries and areas, thereby plementing the developmental assistance of the United States. b. What types of political risks can OPIC insure against? OPIC offers insurance coverage for four separate types of political risk, which have their own specific definitions for insurance purposes: Inconvertibi