Foreign direct investment versus licensing Le Jouet is a profit-maximizing firm producing toy trainsa capital-intensive goodwhich are sold in its home country, France, and abroad in Russia. Le Jouet chose foreign production as a method of penetrating the Russian market and has to decide whether it is more efficient to directly invest in Russia to establish a production subsidiary or to license the technology to a Russian firm to produce its goods. On the following graph, AVCRussia is the average variable cost curve of a Russian firm producing toy trains. (This curve represents costs such as labor and materials.) The curve ATCSubsidiary represents the total unit costs Le Jouet will face if it establishes a subsidiary in Russia