Question

Which of the following is a likely reason for choosing FDI instead of licensing?

a. The company is in the process of shutting down all its operations.
b. Sharing intellectual know-how with a potential foreign rival could be risky.
c. The company's lower level employees are very keen on traveling abroad at the expense of the company.
d. The company's competitive edge lies in things that are easy to license (e.g. software).

Answer 1

The correct option is B

Step-by-step explanation:

FDI is an investment in the business through an investor from another country and control is with the foreign investor over the company purchased.

Licensing means all the contracts to which the third part has granted or licensed any right to its subsidiaries or company.

So, the reason for preferring FDI instead of license is sharing the intellectual know how with the foreign rival might be risky as this is a limitation in licensing.