Licensing increases a firm's ability to realize experience curve and location economies by producing its product in a centralized location.

Question

Quizplus · Accepted Answer

Licensing involves granting permission to use a firm's technology or know-how to another firm in exchange for a fee or royalty. This does not necessarily lead to centralized production, and thus may not always increase a firm's ability to realize experience curve and location economies. Instead, licensing may allow the licensor to benefit from the licensee's existing production facilities and local knowledge, which may be spread across different locations.

Licensing Increases a Firm's Ability to Realize Experience Curve and Location