The Exploration of Dunnings OLI Framework - Coursework Example

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The paper states that in delving into the extent that Dunning’s OLI framework provides a realistic explanation of the decision-making process a multinational enterprise (MNE) goes through in considering where to place Foreign Direct Investment (FDI), some interesting factors were uncovered…
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Download file to see previous pages OLI stands for Ownership, Location, and Internationalisation, which represent three potential advantage facets a company uses to engage in equating the international stage in terms of investment (Brouthers et al, 1999, p. 837). In understanding what is meant by OLI, each of the three elements comprising the term need to be explained as a means to set the context of this study. With regard to Ownership, the characteristics looked for represent the firm having advantages in terms of modes and or methods of production techniques, trademarks, scale (concerning economies of operation) as well as management skills that tend to lead toward an entrepreneurial outlook (Brouthers et al, 1996, pp. 379-380). The significance of the above, along with a company having specific competitive advantages with regard to Foreign Direct Investment (FDI), represent important reasons and rationales in terms of ascertaining the potential degree(s) of success it will or might have  (Bevan and Estrin, 2004, pp. 780-783). Prior to delving further into the remaining two OLI elements, an understanding of Foreign Direct Investment is needed in order to aid in setting the context. One definition stated that FDI represents “… a company from one country making a physical investment into building a factory in another country” (Going Global, 2010).  It continues “… The direct investment in buildings, machinery, and equipment is in contrast with making a portfolio investment, which is considered an indirect investment” (Going Global, 2010). In another definition, FDI is defined as “A major investment by a foreign corporation … A common example of foreign direct investment is a situation in which a foreign company comes into a country to build or buy a factory” (The Free Dictionary, 2012). As a means to clarify FDI, the Organisation for Economic Co-Operation and Development (OECD, 1999, p. 7) has constructed what they term as a benchmark definition. The OECD (1999, p. 7) states “Foreign Direct Investment reflects the objective of obtaining a lasting interest by a resident entity in an economy (direct investor) in an entity resident in an economy other than that of the investor (direct investment enterprise)”. It goes onto add that “The lasting interest implies the existence of a long-term relationship between the direct investor and the enterprise and a significant degree of influence on the management of the enterprise” (OECD, 1999, p. 7). “Direct investment involves both the initial transaction between the two entities and subsequent capital transactions between them and among affiliated enterprises, both incorporated and incorporated” (OECD, 1999, p. 7). As can be seen from the complexities of FDI investment, the considerations a firm needs to take into account in some cases can be quantified, whilst in others, they cannot. This examination will bring forth both instances. In so doing, it must be remembered that the safest FDI locales might not necessarily represent ones that suit the particular demands or dictates a firm needs. ...Download file to see next pagesRead More
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