Eclectic (OLI) theory of FDI

Topic 

Eclectic (OLI) theory of FDI

Instructions 

For this task, it is CRITICAL that you use the lecture notes. For each question below I
have listed the relevant LECTURE – please read! I will check that the lecture notes
have been used.
2. Must use THEORY – LOOK AT LECTURES.

Answer Preview 

In particular, Dunning’s analysis of “alliance capitalism” faces major criticism for its lack of contextualization. According to Lundan and Hagedoorn (2001), while Dunning’s explanation can exemplify the possible effect of alliances and acquisition in the market, the market power modalities seem to focus on cost economization. As such, Dunning does not seem to take into account the dynamics of international firms and the process of internationalization. In his explanation, Dunning asserted that the last few decades have seen some dynamics in the hierarchies as well as the internationalization of particular types of internationalization through alliances (Cantwell and Narula, 2001; Leto-Gillies, 2012). While these forms of internationalization are evidently different, the application of Eclectic Paradigm considers them as complementary. Yet, the contextualization of internationalization would see foreign direct investment and alliances as substitutes. Therefore, Dunning’s framework works well as a descriptive device in terms of cost economizing and improving efficiency, and less as an explanatory device that addresses strategic elements of internationalization of firms.

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