Discussion Of The Contribution Of Dunning's Eclectic Theory

1951 words - 8 pages

"Technological changes, particularly in the space-shrinking technologies of transport and communication, help to make possible the internationalization of economic activity and the development and geographical spread of transnational corporations" (Dicken, 1992, p.120). These changes have made a great explosion in Foreign Direct Investment (FDI) in the last 20 years throughout the world. FDI has been growing at a high rate, and trade barriers have fallen extensively at the same time (De Santis and Stahler, 2003; Javalgi, Griffith, and White, 2003).FDI itself is a form of investment that is best suited to provide risk sharing in a world economy where financial contracts are plagued by imperfect enforcement mechanisms (Albuquerque, 2003). There are numerous factors that can influence a firm's decision to undertake FDI. Some FDI may be undertaken to reduce the firm's costs; some of the decision to engage in FDI may be affected by such demand factors as developing access to new customers, exploiting competitive advantages, etc. In addition, political considerations and environmental issues may also play a role in FDI (Mahoney, Trigg, Griffin, and Pustay, 2001). In short, the fundamental purpose of any business firm to engage in FDI, of course, is to make a profit (Hill, 2000).One of the examples of FDI is the foreign investment made by Citigroup Inc to buy South Korea's KorAm Bank for US$ 2.7 billions. Under the cautious agreement, the world's largest lender will pay about 3 trillion won or about 16,000 won per share, for KorAm's stock (Jae-kyoung, 17 February 2004; Agence France Presse English, 23 February 2004). The question is, why a company like Citigroup Inc does not bulk up on consumer bank acquisitions in its domestic market as what their rivals (such as: Bank of America and J.P. Morgan) has done? Furthermore, Reuters reported that Citigroup Inc is looking for growth in Asia's developing markets after already buying banks in Mexico and Poland. "It's a large under-served market from our point of view. The Korean financial services market is only opening now. There are a whole series of markets...that are now opening to foreign direct investment. What we have accomplished in Mexico with Banamex or Poland with Handlowy, we feel we can accomplish in a number of Asian countries," Deryck Maughan, chief executive of Citigroup International (Reuters, 23 February 2004).But, even if the market in foreign country is good, does a company will directly, without any considerations, decide to make an investment? Of course not, in order to make profit when internationalizing business, first of all, business firms have to answer this question "Is there any advantages to producing abroad?" This issue was then incorporated by John Dunning in his eclectic theory, which combines location advantage, ownership advantage (Ownership advantage theory), and internationalization advantage (Internalization theory) to form a unified theory of FDI. In addition, Dunning's...

Find Another Essay On Discussion of the contribution of Dunning's Eclectic Theory

Philosophical Discussion Regarding Socrates' Theory Of Recollection

997 words - 4 pages The philosophical discussion begins as Cebes brings up Socrates' Theory of Recollection, which claims that all learning is recollection. Simmias cannot quite remember the proof of that theory, and asks for an explanation. Socrates begins by pointing out that we can be reminded of one thing by being made conscious of another thing. For instance, if one sees an article of clothing that belongs to a beloved, one will immediately be reminded of the

The Unique Contribution of Anthropology Essay

865 words - 4 pages :9) As a field of study it offers a view of the world that is comparative, leery of generalizations, and both microscopic and macroscopic. (Eriksen 2004:6) Theory is the first of two major resources an anthropologist has at his disposal. Though subject to both internal changes from shifting beliefs and ideas of individual researchers and external changes from within the field of anthropology, theory plays an essential role in the anthropological

The Contribution of Stephen Hawking

947 words - 4 pages research, Hawking tried to explain the outcome of the research through a scientific theory. First of all, for Hawking "theory has to satisfy two requirements: It must accurately describe a large class of observations on the basis of model that contains only few arbitrary elements, and it must make definite predictions about the results of future observations" (Hawking 68). Basically, a theory has to be simple enough to qualify and has to make at least

The Contribution of Rachel Carson

967 words - 4 pages For many decades insects were and still are considered enemies mainly for farmers. In the early 1900's there was a woman biologist who devoted her entire life to saving nature. Her name was Rachel Carson and she changed the whole idea of what people thought was the right solution for getting rid of insects. At that time, scientists discovered pesticides that would kill the insects and end the war between farmers and insects that attacked their

Discussion of Ciminological Theories: Trait Theory & Developmental Theory

2242 words - 9 pages credibility of the theories and help achieve a deeper knowledge of criminals and antisocial behaviors. There are a number of existing criminological theories and angles, which criminologists develop and study to answer many of the questions raised about the origin of crime. Two major theories have been chosen for discussion in-depth within this paper: the Trait Theory and the Developmental (or life-course) Theory. First, each theory, as well as

Karl Marx's Contribution to Labor Theory of Value

1263 words - 5 pages Contrary to popular belief, the origin of the Labor Theory of Value (LTV), which states that the value of a commodity is proportional to the amount of labor consumed to produce it, is not attributable to Karl Marx. While this may be true, the LTV is most familiar to economists as the cornerstone of Marx’s argument against capitalism in Capital. In studying Marxism, it is important to understand the degree to which Marx expounded upon the

A discussion of the theory that class-based differences in educational

1044 words - 4 pages A discussion of the theory that class-based differences in educational achievement are mainly due to familial factors. Throughout the twentieth century, there have been many changes made to the structure of the education system. These include the 1944 Education act which made secondary education compulsory and introduced the tri-partite system of school, though the move to a comprehensive system of schools in the 1960’s, to the

How does IR Theory explain the United Nation’s contribution to the maintenance of international peace and security?

2039 words - 9 pages How does IR Theory explain the United Nation’s contribution to the maintenance of international peace and security? “More than ever before in human history, we share a common destiny. We can master it only if we face it together. And that is why we have the United Nations.” (Annan: 2001) It is generally considered that international organisations ought to stand accountable for the preservation of global stability and peace, be this

Franz Boas Discuss the Contribution of Anthropology

1741 words - 7 pages studied and learn their language (MacDonald, 1998). Boas developed his theories during a time when the work of Darwin was starting to be popularized and reinterpreted. The most important reinterpretation find its expression in the eugenics movement, initiated by Sir Francis Galton who applied Darwin's theory of evolution to humans, believing possible to improve the human race through selective breeding. Galton named his study on the heritability

Contribution to the Evolution of Distance Education

1528 words - 6 pages traditional student have for so many years. Andragogy is a theory which is focused on the teaching of adults. The term Andragogy was first coined in 1833 by the German educator Alexander Kapp (Reischmann, 2000), and was adopted in the United States by Malcolm Knowles. Knowles began his career as a mentor for the youth. As a youth, his intelligence was obvious, for he created a chart to assist other scout members in earning advancement awards

The Discussion of Conceptual Frameworks

4159 words - 17 pages The Discussion of Conceptual Frameworks The existence of a CF is to serve as a guide for the standard setters to provide them with a set of objectives and constraints. Furthermore, CF provides a framework for setting standards, a basis for resolving accounting disputes and fundamental principles, which then do not have to be repeated in the Standards. The CF has been developed

Similar Essays

A Critical Review Against Dunning's Eclectic Theory

5612 words - 22 pages INTRODUCTIONIt is true of everything that the first steps ate both the most important and the most difficult. To begin with, theorization consists of a set of definitions of concepts. The basic concepts underlying the eclectic theory of the multinational enterprise (MNE)(1) are currently being criticized by the internalization theorists(2) in that the 'ownership advantage' is 'double counting,' that is, the internalization and location factors

With Reference To At Least Three Companies Of Your Choice, Critically Evaluate Dunning's Eclectic Paradigm As A Framework Explaining The Reasons Why Companies Engage In Foreign Direct Investment

3043 words - 12 pages case because "the eclectic theory is not a theory but a paradigm (Masahiko.I 1991 pp456).Explaining the reasons for FDI is a complex task; there is no single theory that can easily explain the phenomena. In spite of criticisms, Dunning's EP has been the leading explanation of the growth of FDI over the past two decades, due to its broad appeal. It remains a powerful and robust paradigm (vis à vis other paradigms) for firms to apply when

The Multinational Company: Emergence And Significance Dunning's Eclectic Paradigm

909 words - 4 pages Dunning's 'eclectic paradigm'. How useful is it as a theory of why companies chose to become multinational? What are its main strengths and weaknesses? According to Dunning, a firm will engage in international production when all of the following three conditions are present.         A firm must possess certain ownership-specific advantages not possessed by competing firms of other nationalities. These are assets internal to a firm, e.g

The Contribution Of Robert Merton’s Work To Criminological Theory

2269 words - 9 pages inability of individuals to gain societal goals, to Merton’s perspective that related to individuals and groups inequality of means, to Cohen’s definition that was manipulated to fit the time of sub-cultural delinquency, they all sought to explain why strain occurred in society (Akers & Sellers, 2007). Nevertheless, Merton’s contribution to criminological theory has been evidenced through to today. Because Merton took a different perspective to