A market imperfection that can encourage foreign direct investment is the possibility that a company will create a future competitor by charging another company for access to its knowledge.

Question

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If a company charges another company for access to its knowledge or technology, it could potentially create a future competitor. This market imperfection could push the first company to invest directly in a foreign market to maintain control over its intellectual property and avoid creating competitors.

A Market Imperfection That Can Encourage Foreign Direct Investment Is