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Dunning's Model - Literature review Example

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In this paper, the strengths of the OLI (ownership, location, internalization) model developed by John Dunning to the study of FDI are appreciated whiles examining the limitations of the model in designing an international corporate strategy for firms…
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Dunnings Model
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Download file to see previous pages In the opinion of Byrne and Popoff (2008), some of the most important considerations to make include the choice of destination, choice of governance forms and levels of activities to be engaged in. meanwhile, Douma and Schreuder (2012) noted that as far foreign direct investment (FDI) is the approach to internationalization a company seeks, the eclectic paradigm, also known as the OLI (ownership, location, internalization) model developed by John Dunning is one important framework that provides general paradigm for knowing the determinants of the FDI. By extension, the paper takes a stance that it is one thing to be engaged in internationalization and another to have an international corporate strategy. This is because the latter is wider and covers several aspects of corporate growth and expansion management than the former (Li, Ferreira & Serra, 2009). There are several ways that the OLI model helps in influencing the study of FDI. On the whole, the model helps firms to make the decision on becoming multinational by understanding the potential sources of advantages they have that could make them successful. The model is important in providing firms with an understanding of their own advantages, where the question of firm-specific qualities of the firm is addressed (Antras & Elhanan, 2004). Because the firm-specific advantages are tied around the company’s unique approach to doing business, it helps firms to identify their competitive advantage which allows them to overcome the cost of operating in international markets (Peng, 2001). Without applying the OLI model and for that matter ownership advantage therefore, it becomes difficult for firms to identify their competitive advantage with which they will become preferred options for consumers instead of their competitors. Secondly, the OLI model is relevant in helping firms identify location advantages, where the firms answer questions on the best places to choose for internationalization (Neary, 2007). ...Download file to see next pagesRead More
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