Describe the Differences Between Market and Hierarchical Governance Options for Firms

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The Answer is When firms maintain a traditional arm's-length market relationship between themselves and their nondomestic customers, they are using the market governance option to organize their international organization. For example, a firm could decide to export its products to a foreign market by working with a firm in that country to receive, market and distribute its products.
When firms, instead, decide to integrate their international operations into their organizational hierarchies by acquiring a firm in a nondomestic market or by forming a new wholly owned subsidiary to manage their operations in a nondomestic market, they are pursuing the hierarchical governance option.

Describe the Differences Between Market and Hierarchical Governance Options for Firms

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