Question

The management team at Pass the Ketchup Brands has decided not to license its product because of concerns that this will create opportunities for another company to have access to their secret recipe. For this reason, the company decides that FDI is their best course of action. Which economic theory does their choice represent?

Answer 1

The economic theory the choice of management team at Pass the Ketchup Brands represent is known as internalization theory.

What is internalization theory?

Internalization theory is an economic theory that tends to protect companies' sole rights to their products. The theory gives protection to local industries who aim at having larger market share.

This is because when other companies know the secret or having access to their product make up, such might reduce their market share of that product.

Hence, the economic theory the choice of management team at Pass the Ketchup Brands represent is known as internalization theory.

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