Identify the theory that seeks to explain why firms often prefer foreign direct investment over licensing as a strategy for entering foreign markets.
A)Internalization theory
B)Internationalization theory
C)Perfect markets theory
D)Small markets theory

Question

Quizplus · Accepted Answer

Internalization theory argues that firms choose foreign direct investment over licensing when they want to retain control over their core competencies and protect their competitive advantage in foreign markets. Firms may face difficulties in transferring their knowledge and technology to licensees, and may not be able to fully capture the value created by their intellectual property. By investing directly in foreign markets, firms can better protect their proprietary technologies, and are better positioned to respond to local market conditions and changes in business environments.

Identify the Theory That Seeks to Explain Why Firms Often