Internalisation advantages arise from which factors?

Internalization advantages relate primarily to the ability of firms to reduce transaction costs associated with using international markets. When companies decide to internalize operations rather than relying on external entities or markets, they can streamline processes, maintain control over production and distribution, and protect proprietary knowledge. This reduction in transaction costs means that firms can operate more efficiently and effectively while mitigating risks associated with dealing with external market transactions, such as negotiating contracts or managing supply chain dynamics.

The other options, while they may present different advantages in international business, do not directly pertain to the concept of internalization advantages. Competitive pricing in local markets addresses market conditions rather than the strategic choice of internalization. The availability of skilled labor can support operations but is not a direct internalization advantage. Lastly, regulatory incentives may affect a firm's decision to enter a market but are not intrinsically related to the benefits of internalizing operations within the company itself. These are important considerations in global business, but they do not encapsulate the essence of internalization advantages.