What are typical reasons why MNCs expand internationally?
MNCs can capitalize on comparative advantages (such as a technology or cost of labor) that they have relative to firms in other countries, which allows them to penetrate those other countries’ markets. Given a world of imperfect markets, comparative advantages across countries are not freely transferable. Therefore, MNCs may be able to capitalize on comparative advantages. Many MNCs initially penetrate markets by exporting but ultimately establish a subsidiary in foreign markets and attempt to differentiate their products as other firms enter those markets (product cycle theory).