Question

In which situation does the internalization theory recommend FDI as opposed to licensing?

a) High market uncertainty
b) Low host country risk
c) Stable regulatory environment
d) Strong protection of intellectual property

Answer 1

The internalization theory recommends FDI over licensing in a stable regulatory environment.

Step-by-step explanation:

The internalization theory recommends FDI (Foreign Direct Investment) over licensing in a situation where there is a stable regulatory environment. Licensing involves granting permission to a foreign company to use intellectual property, while FDI entails establishing a physical presence in a foreign market. In a stable regulatory environment, FDI provides more control and flexibility for a company compared to licensing, ensuring they can adapt to any changes in regulations.