In the explanation of the advantage of internationalization the first approach of the internationalization of MNCs emphasizes the importance of technology transfer. Technology transfer may come across with some difficulties. It is difficult for a potential buyer to appraise the actual value of knowledge. Besides knowledge can not be packed and sold. The intellectual property rights are also difficult to secure. Therefore for a MNC the establishment of a new enterprise in a foreign country is more profitable than the sale of technology to another company.
The second approach intensifies on vertical integration. For example under the assumption that both companies are monopolies, the price of input used by first company and produced by second company is tried to be lowered and increased by the first and second companies respectively. Therefore a dispute between these two companies will exist. Moreover some coordination problems may occur because of the demand and supply imbalances between two companies. Volatile prices constitute high risks for both companies. In case of a vertical integration of these two companies the problems will disappear or be relieved.