Which of the following is a major drawback of using the product life-cycle theory in explaining FDI?
A) It ignores the fact that firms invest in a foreign country when demand in that country will support local production.
B) It does not explain why firms invest in developing countries when cost pressures become intense.
C) It fails to identify when it is profitable to invest abroad.
D) It ignores the fact that licensing as an entry strategy has its limitations.

Question

Quizplus · Accepted Answer

The product life-cycle theory simply argues that once a foreign market is large enough to support local production, FDI will occur. This limits its explanatory power and its usefulness to business in that it fails to identify when it is profitable to invest abroad.

Which of the Following Is a Major Drawback of Using