According to internalization theory:
A)licensing gives a firm the tight control over manufacturing, marketing, and strategy in a foreign country that may be required to maximize its profitability.
B)licensing may result in a firm's giving away valuable technological know-how to a potential foreign competitor.
C)licensing has no major drawbacks as a strategy for exploiting foreign market opportunities.
D)a problem with licensing arises when the firm's competitive advantage is based much on its products rather than on the management, marketing, and manufacturing capabilities that produce those products.
E)licensing is more profitable than FDI.

Question

Quizplus · Accepted Answer

According to internalization theory, licensing has three major drawbacks as a strategy for exploiting foreign market opportunities. First, licensing may result in a firm's giving away valuable technological know-how to a potential foreign competitor. A second problem is that licensing does not give a firm the tight control over manufacturing, marketing, and strategy in a foreign country that may be required to maximize its profitability. A third problem with licensing arises when the firm's competitive advantage is based not as much on its products as on the management, marketing, and manufacturing capabilities that produce those products. The problem here is that such capabilities are often not amenable to licensing.

According to Internalization Theory