The argument that firms prefer FDI over licensing to retain control over know-how,manufacturing,marketing,and strategy or because some firm capabilities are not amenable to licensing constitutes the
A)comparative advantage theory.
B)distribution theory.
C)new trade theory.
D)internalization theory.
E)licensing theory.

Question

Quizplus · Accepted Answer

The argument that firms prefer FDI over licensing to retain control over know-how, manufacturing, marketing, and strategy or because some firm capabilities are not amenable to licensing is explained by the internalization theory. This theory suggests that firms opt for FDI to internalize their business activities within their organizational boundaries rather than relying on external partners through licensing. This way, they can retain control over their core competencies and knowledge assets, which are critical to their competitive advantage.

The Argument That Firms Prefer FDI Over Licensing to Retain