Dunning’s Eclectic Paradigm Introduction 2 Academic Literature 2 Ownership-Specific Advantages 3 Internalization Advantages 4 Location Specific Advantages 5 Critical evaluation 6 Comparison with other theories 8 Conclusion 9 References 10 Bibliography 12 Table of Contents Introduction 3 Academic Literature 3 Ownership-Specific Advantages 4 Internalization Advantages 5 Location Specific Advantages 6 Critical evaluation 7 Comparison with other theories 9 Conclusion 10 References 11 Bibliography 12 Introduction Investment in foreign land by the multinational firms has been a major issue of discussion over the past decades…
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At the present economic environment such theories and models are considered to be very important as the importance of multinational organizations to the global economy has increased significantly. Dunning’s eclectic paradigm theory is one of the most widely discussed theories in the world of international production. This paper attempts to present a clear description of this theory and several of its dimensions. The paper also includes a proper analysis of the criticisms that the Dunning’s model has faced over the years. There are several other theories on the similar subject and Dunning’s theory can be compared with those to analysis the effectiveness of it. This paper includes such a comparative analysis that is likely to help an individual to have a clear conception regarding the entire picture of such theories. Academic Literature John H Dunning is famous in the international business arena for his ‘Eclectic Paradigm’ theory. It is actually the integration of several theories on internationalization. It covers many mainstream theories such as Ohlin and Heckscher’s ‘factor endowment theory’, Coase’s ‘trasaction cost theory’, Hymer’s ‘monopolistic advantage theory’ and ‘internalization theory’ of Casson and Buckley. In 1976, Dunning presented the core concept of eclectic paradigm at Nobel Symposium which is located in Stockholm. The theory explains precisely why a firm should go global. Dunning attempted to provide a clear and complete explanation regarding international production. He has consistently supplemented and improved his theory in accordance to various developments in the global economic environment and also in accordance to several constructive criticisms. Dunning opined that there are three conditions that have significant influence over the firm’s decision regarding transnational production. In other words, a firm will involve in ‘international production’ if these three conditions are met. The three conditions are 1) ‘ownership-specific advantages’, 2) ‘internalization advantages’ and 3) ‘location specific advantages’ (Dicken, 2007). Each of them is properly described below. Ownership-Specific Advantages According to Dunning, an organization must have some ownership specific advantages which are not possessed by the rival organizations of other countries. The basis of this theory of Dunning lies in the ‘Monopolistic Advantage Theory’ that was developed by Hymer. According to Dunning, ownership specific advantages “must be sufficient to compensate for the costs of setting up and operating a foreign value-adding operation in addition to those faced by indigenous producers or potential producers” (Dunning, 1981). These advantages are like ‘internal assets’ of a firm which is the sole owner of them. Ownership specific advantages can be gained from the factors like technology, knowledge, internal brands, human resources etc. (Dicken, 2007). In the words of Dunning, ownership specific advantages “need not arise from multinationality” (Perry, 1992). These advantages
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It aims not only to make profits that are larger than those of a local company are,but it aims to make its presence felt throughout the country.When a company seeks to satisfy the demand of international consumers for its product,by starting a commercial enterprise in those areas as well,it is known as direct foreign investment.
Multi, in this context, may mean more than one and national may mean countries or nations.There are a number of famous companies which we deal with. These companies are famous around the world rather than just operating in their host countries.
As an organisation seeking to expand to foreign markets, one has to take into account the vigorous criticisms of commentators on multinationals. These criticisms fall into an alarming number of bands, but particularly the cultural impact of multinationals on developing nations.
the ability to produce the goods and services at lower costs.
An example of Multinational Corporation is the Coca cola Company which is the largest beverage manufacturing company in the world. The company has been in existence since 1892 and manufactures, distributes and markets non-alcoholic beverages and syrups globally.
Traditional economies is characterized by production for localized consumption within a family or a as mall area. It is a market system, which encourage small-scale production of goods using simple methods and limited resources. This
In fact, the global rankings of the biggest FDI recipients reflected the spontaneous changing patterns of global investments, as 9 out of 20 ranked recipients were the developing states. The gain of the developing Asian countries maintained at historical high
Being socially responsible is not the core business of the multinational corporations, but it is an ethical requirement that they integrate environmental and social concerns in their interactions with the
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