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________ seeks to explain why firms often prefer foreign direct investment over licensing as a strategy for entering foreign markets. Select one: a. The noninterventionist theory b. Internalization theory c. The product life-cycle theory d. Knickerbocker's theory

Question

________ seeks to explain why firms often prefer foreign direct investment over licensing as a strategy for entering foreign markets.

Select one:

a. The noninterventionist theory

b. Internalization theory

c. The product life-cycle theory

d. Knickerbocker's theory

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Solution

The correct answer is:

b. Internalization theory

This theory suggests that firms prefer foreign direct investment over licensing to retain control over their technological know-how, and to manage and coordinate their operations better across different locations.

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