The attractiveness of exporting increases in comparison to FDI or lice

QUESTION

The attractiveness of exporting increases in comparison to FDI or licensing when products have a low value-to-weight ratio.

Indicate whether the statement is true or false.

ANSWER

FALSE
The viability of an exporting strategy is often constrained by transportation costs and trade barriers. When transportation costs are added to production costs, it becomes unprofitable to ship some products over a large distance. This is particularly true of products that have a low value-to-weight ratio and that can be produced in almost any location. For such products, the attractiveness of exporting decreases, relative to either FDI or licensing.