2. FOREIGN DIRECT INVESTMENT
DUNNING ECLECTIC’S VIEW
JOHN DUNNING (1977)
-He pionerred the research to find a comprehensive
framework for explaining F.D.I and known as the O.L.I
paradigm or O.L.I. framework
O.L.I Framework :
O – (Ownership Specific Advantages)
-refers to the competitive advantages of the enterprise
seeking to engage in FDI
-the greater the competitive advantages of the investing firm,
the more they are likely in foreign production
-trademark, production technique, entrepreneurial skills,
returns to scale are characteristics of ownership advantages
5. FOREIGN DIRECT INVESTMENT
L – (Location Specific Advantages)
-locational attractions refer to the alternative countries or
regions , for undertaking the value adding activities of MNE
(multi-national enterprise)
-are linked to specific factors of a foreign country that could
include cheap labor, superior production processes, local
image, governmental trade barriers or others, which justify to
undertake production in that country in order to obtain new
competitive advantages,
- it can internally exploited, through complementary
resources of the firm like an international distribution
network, or finance capability.
7. FOREIGN DIRECT INVESTMENT
I – (Internalisation Advantages)
- advantages by own production rather than producing
partnership arrangement
- benefits of retaining assets and skills in the firm, market
controls among others
Internalisation
- a transaction conducted within the confines of a
corporation rather than in the open market
9. FOREIGN DIRECT INVESTMENT
DISINVESTMENT
- It is the action of an organization or
government selling or liquidating an asset or
subsidiary
- a company or government organisation will
divest an asset or subsidiary as a strategic
move for the company , planning to put the
proceeds from the divestiture to better use
that garners a higher return on investment
