GMS 724 Chapter Notes - Chapter 12: Vertical Integration, Intangible Property, Franchising
14 Jan 2016
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Given liability of foreignness and the extra costs of investing abroad, contracting another company is appealing, but only if management can find a foreign provider at acceptable terms. Different operating units within the same company are likely to share a common corporate culture, which expedites communications. The company can use its own managers, who understand and are committed to carrying out its objectives. The company can avoid protracted negotiations with another company on such matters as how each will be compensated for contributors. The company can avoid possible enforcement problems. Appropriability theory: the theory that companies will favour fdi over such non-equity operating forms as licensing arrangements so that potential competitors will be less likely to gain access to proprietary information. Fdi ownership takes place by transferring abroad financial and/or other tangible or intangible assets: advantages of acquisition: Adding no further capacity to the market. Easier financing at times: may choose making greenfield investments (constructing new facilities) if:
