Firms prefer FDI to licensing because FDI_____.

Question

Quizplus · Accepted Answer

FDI provides the firm with direct ownership to its foreign assets, which gives the firm greater control over its operations in the foreign market. With licensing, the firm only grants the right to use its technology or products to a foreign entity without direct ownership or control. Additionally, licensing requires dissemination of technological know-how to the foreign entity, raising the risk of opportunism and loss of competitive advantage. FDI also offers protection against economic agglomeration, as the firm can establish a physical presence and compete on its own terms.

Firms Prefer FDI to Licensing Because FDI_____