Explain the types of advantages highlighted by John Dunning in the Essay - 1

Explain the types of advantages highlighted by John Dunning in the Eclectic Paradigm. In what ways does this theory repersent an advance on those of earlier theorists - Essay Example The theory of electric paradigm seeks to provide a general perspective for determining the degree and pattern for both domestic and foreign-owned production companies. Dunning does not only consider organization structure as significant but also added three significant theoretical factors including ownership, location and internalization advantages. The major aim of introducing the OLI-model was to merge the international economic theories into one approach. Dunning also distinguishes different types of foreign direct investments; thus, the model takes into considerations the resources of the country, location advantages and ownership advantages. Thus, Dunning identifies ownership, location and internalization (OLI) advantages some of which offer the explanation to the chronological acts of domestic and foreign-owned production. Ownership-specific advantages are the competitive advantages of the companies seeking to connect in FDI (Foreign Direct Investment). Therefore, companies that highly engage in foreign production have high chances of achieving competitive advantages. The ownership advantages are connected to the size and market position of the specific firm and these ownership advantages are often referred as monopolistic or competitive advantages (Cantwell and Narula 2001, p.111). They are advantages to the specific firm because they are the main asset for the specific firm. They also offer the firm a market position or cost advantage over a certain firm; thus enabling the firm to achieve effective business performance. Therefore, it is vital to develop and protect the ownership advantages because competitors may attempt to infringe or copy them. These advantages are further divided into standard ownership advantages, benefits of being a multinational enterprise and benefits derived from belonging t o large industry. First, the standard ownership advantages are those advantages that an industry requires to compare with other rival industries in a