In which of the following situations does the internalization theory recommend FDI as opposed to licensing?
A) when the firm has know-how that can be adequately protected by a licensing contract
B) when the firm produces products that have a low value-to-weight ratio
C) when a firm's skills and know-how are amenable to licensing
D) when the firm needs tight control over a foreign entity

Question

Quizplus · Accepted Answer

Licensing does not give a firm the tight control over manufacturing, marketing, and strategy in a foreign country that may be required to maximize its profitability. When tight control over a foreign entity is desirable, foreign direct investment is preferable to licensing.

In Which of the Following Situations Does the Internalization Theory