Licensing is a popular form of foreign investment because it does not need a sizable commitment of funds, and political risk is often minimized.

Question

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Licensing allows a company to grant permission to a foreign company to use its intellectual property or technology, without requiring significant financial investment or direct involvement in the foreign market. It also often involves limited exposure to political risk since the licensing agreement is usually between two private parties, rather than involving government intervention or ownership.

Licensing Is a Popular Form of Foreign Investment Because It