This study theoretically examined the effects of transaction costs and production costs on internationalization and empirically analyzed internationalization theory using a sample of Korean textile and apparel firms. The results are consistent with gradual internationalization, showing that as knowledge of foreign markets accumulates, firms are more likely to increase their market commitment to exploit economic opportunities abroad. The study also reveals that trade barriers and production costs have a significant impact on firm internationalization. However, unlike previous studies that demonstrated the importance of transaction costs in the choice of entry mode for foreign markets, the hypotheses related to transaction costs were not supported by the analytical results.