According to Internalization Theory, One of the Drawbacks of Licensing

question 5

Multiple Choice

According to internalization theory, one of the drawbacks of licensing is that

• A) it may result in a firm's technological know-how being restricted to a limited knowledge base and stifles any future development.
• B) it does not give a firm the tight control over manufacturing, marketing, and strategy in a foreign country that may be required to maximize its profitability.
• C) when a firm allows another enterprise to produce its products under license, the licensee bears the costs or risks.
• D) its use is restricted by the government through the imposition of tariffs and quotas.
• E) it is less cost-effective than FDI.

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Definitions:

Consequentialism

An ethical theory that judges whether an act is right or wrong based on its consequences.

Utilitarianism

The ethical principle that urges individuals to act in a way that creates the most happiness for the largest number of people.

Bribes

Illicit payments, offers, or receipts of value offered or made to influence the actions or decisions of someone in a position of power, often to gain an unfair advantage.

Supplies

Goods and materials required for the operation of a business or for completing a particular task, project, or service.