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Technological changes particularly in the space-shrinking technologies of transport and communication in unison with the overall decline in trade barriers help to make possible the internationalisation of economic activity and also the development and geographic spread of companies Dicken pp 120 Adapted These revolutions have induced the explosion in Foreign Direct Investment FDI in the last 20 years FDI is the principle way that firms compete internationally in the modern global economy It is an investment in which the investor acquires a substantial controlling interest in a foreign firm or builds a subsidiary in a foreign country Maskus K 1995 Firms internationalise their operations for numerous different reasons both general and specific The most fundamental reason however is the drive for profit which is the quintessence of all capitalist activity In extending business activities beyond national frontiers firms must explore a myriad of avenues As uncertainty is paramount in the world of business predictions made in explaining why certain phenomenon occurs are essential These theories provide useful instruments for decision-making purposes The British Economist John Dunning professor at the University of Reading has produced a corpus of work in international business from them Dunnings Eclectic Paradigm EP proposes a multifaceted framework for incorporating a number of context specific and operationally testable theories seeking to explain a particular component of the internationalisation process of FDI The approach specifies three sets of explanatory factors to explain the nature and direction of FDI Ownership factors Location factors and Internalisation As the three principles are derived from a variety of theoretical approaches organisation trade and location the notion is labelled as eclectic The first condition is that of the Ownership Advantage OA This addresses the why question why go abroad This question hypothesizes that a firm possesses net ownership advantages vis vis other firms or nationalities in serving particular foreign markets This firm specific advantage largely takes place in the form of intangible assets which
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