Explain each element of the Dunnings OLI paradigm. Give examples for Essay

Explain each element of the Dunnings OLI paradigm. Give examples for each of the OLI elements for market-seeking and resource-seeking types of investment (6 in - Essay Example These categories are market seeking, resource seeking, efficiency seeking and strategic resource seeking motives. Market and Resource seeking motives have been the two most recognized categories of motives (Dunning 2000). These two are the main reasons for most first time internationalization attempts by firms. Yet, efficiency seeking and strategic asset seeking motives increase in importance and are more common as motives for those companies who are already engaged in multinational activity. Dunning also confirms that closer relations with customers and durable relations with suppliers were equally important motives. Besides, he suggests that internationalization was driven by opportunities abroad rather than threats at home. Opportunity has been described in a different vein by Williamson (1975). He states that incomplete contracts and missing markets gave rise to opportunistic behaviour and to fill the void companies chose to face the challenge with replacing external contracts by direct ownership and internal hierarchy. Dunning’s eclectic paradigm is useful in analysing the complex decisions made by Firms to go international. The three OLI factors help to explain why production is based in a foreign land in place of home country. It explains the value additions available to a company in host countries on account of OLI. Each of these factors offers some advantage that enhances the competitiveness and performance of the firm. Basically the home advantage of Ownership is transferred to the host countries for competitiveness. These are then transferred to specific host country where the best the Locational factors exist through FDI. Finally the Internalization or the internal expertise, partly due to O factors accounts for the competitive advantage that was originally the objective of the exercise. This has been confirmed by the similar internalization theory of Rugman (1984). The main