Firms prefer FDI to licensing because:

Question

Quizplus · Accepted Answer

Firms prefer FDI to licensing because it reduces dissemination risks, provides tight control over foreign operations, and certain know-how is difficult to convey without FDI. FDI reduces dissemination risks as the firm has complete control over their operations in the foreign country. FDI provides tight control over foreign operations as the firm can directly manage and oversee their investment. Certain know-how is difficult to convey without FDI as some technology or knowledge may be too complex to transfer through licensing agreements. Therefore, all of these answers are correct reasons why firms prefer FDI over licensing.

Firms Prefer FDI to Licensing Because