The theory of ________ is an attempt to synthesize and extend those theories of FDI that are based on market imperfections.
A) internationalization
B) externalization
C) internalization
D) diversification

Question

Quizplus · Accepted Answer

The theory of internalization is specifically focused on explaining Foreign Direct Investment (FDI) by multinational firms. It suggests that multinationals invest in foreign countries because they are able to internalize the advantages offered by the host country such as cheaper labor, resources, and other market imperfections. This theory synthesizes and extends other FDI theories that also focus on market imperfections such as the eclectic paradigm and the theory of oligopolistic advantage. Options A, B, and D are not specific to FDI and do not capture the concept of market imperfections in multinational investment.

The Theory of ________ Is an Attempt to Synthesize and Extend