According to internalization theory, firms are more likely to license their brand names when transaction costs are high.

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Internalization theory suggests that firms are more likely to internalize operations (i.e., keep activities within the firm) when transaction costs are high, to avoid the costs and complexities of dealing with external markets. Licensing, which involves external transactions, is more likely to occur when transaction costs are low.

According to Internalization Theory, Firms Are More Likely to License