Eclectic paradigm Dunning

Dunning

1. Eclectic Paradigm
by : JOHN H. DUNNING
35142471 : Yoichi Miyata
OLI-Framework or Model

2. The Key Propositions of the Eclectic Paradigm:
(1 -O) The (net) competitive advantages which firms of one
nationality possess over those of another nationality in supplying any
particular market or set of markets. These advantages may arise either
from the firm’s privileged ownership of, or access to, a set of income-
generating assets,orfrom their ability to co-ordinate these assets with
other assets across national boundaries in a way that benefits them
relative to their competitors, or potential competitors.
(2 -I) The extent to which firms perceive it to be in their best interests
to internalisethe markets for the generation and/or the use of these
assets; and by so doing add value to them.
(3 -L) The extent to which firms choose to locate these value-adding
activities outside their national boundaries.

3. Ownership-specific-advantages
Location-specific-advantages
Internalization-advantages
trademark,productiontechnique,entrepreneurial
skills,returnsto scale
existence of raw materials,lowwages,specialtaxes or
tariffs
advantages by own production rather than producing
through a partnership arrangement:licensingor JV
Details of advantages:

4. OLI-Framework or Model :
the structure of organization
Ownership advantages
Location advantages
Internalization advantages

5. InternalizationTheory:
Internalizationtheoryfocusesonimperfectionsinintermediateproductmarkets.Twomain
kindsofintermediateproductaredistinguished:knowledgeflowslinkingresearchand
development(R&D)toproduction,andflowsofcomponentsandrawmaterialsfroman
u p s t r e a mp r o d u c t i o nf a c i l i t ytoad o w n s t r e a mone.
Internalizationoccursonlywhenfirmsperceivethebenefitstoexceedthecosts.When
internalizationleadstoforeigninvestmentthefirmmayincurpoliticalandcommercialrisks
duetounfamiliaritywiththeforeignenvironment.Theseareknownas‘costsofdoing
businessabroad’,arisingfromthe‘liabilityofforeignness’.Whensuchcostsarehighafirm
maylicenseoroutsourceproductiontoanindependentfirm;oritmay
p r o d u c eath o m ea n de x p o r ttot h ec o u n t r yi n s t e a d.

6. TransactionCost:
TYPES OF COST
SEARCH AND
INFORMATION
BARGAINING
AND DECISION
POLICING AND
ENFORCEMENT
★Search and information costs: are costs such as those incurred in determining that the
required good is available on the market, which has the lowest price, etc.
★Bargaining costs are the costs: required to come to an acceptable agreement with the other
party to the transaction, drawing up an appropriate contract and so on. In game theory this is
analyzed for instance in the game of chicken. On asset markets and in market microstructure,
the transaction cost is some function of the distance between the bid and ask.
★Policing and enforcement costs: are the costs of making sure the other party sticks to the
terms of the contract, and taking appropriate action (often through the legal system) if this
turns out not to be the case.

7. InternalizationTheory:
FirmA
FirmA`
ex.subsidiary
others
①Internal transaction
②External transaction
ex:transaction,outsourching
MNEs
1 , Why FDI occurs?①＞②
2 , Market imperfection
3 , Exploit Firm-specific advantage through ①
intangible assets = skills,knowledge,techetc
4 , Transaction Cost go down

8. Three basic forms of international activities:
Export
FDI
International Activities
Licensing
Having knowledge about the target market abroad, for example staff with language
skills, information about import permissions, appropriate products, contacts and so on
less cost-intensive
If there are internalization advantages, the company can invest more capital abroad.
This can be achieved by exportin form of an export subsidiary.
TheFDIis the most capital intensive activity that a company can choose. According to
Dunning, it is considered thatlocational advantagesare necessary for FDI. This can be
realized by factories which are either bought or completely constructed abroad.
most-capital intensive
moderate international activiy

9. 2 types of FDI :
Resource SeekingInvestments
Market Seeking Investments
FDI
★establish access to basic material like
raw materials or other input factors
★enter an existing market or establish
a new market

10. Strong Export Outward FDI
Weak Inward FDI Imports
Strong Weak
Ownership
advantages
Location advantages
Trade and FDI
patterns for industries
and countries

11. OLI-Framework or Model :
the structure of organization
Ownership advantages
Location advantages
Internalization advantages

12. LicensingYes No No
Export Yes No Yes
FDI Yes Yes Yes
Form of
market entry
OwnershipLocationInternalization
OLI-Framework
Categories of advantages

13. OLIconfiguration:
①OLIt0 = t0時点における OLI組成
②OLIt1 = t1時点における OLI組成
③St-n = 企業において未だ機能する戦略
④ΔSt0 → t1 = 戦略の変更に対する OLI組成のt0からt1への変化
①OLIt2 = t2時点における OLI組成
②OLIt1 = t1時点における OLI組成
③St-nΔSt1 = St-nとSt1間の戦略創出差分
④OLIt2 = t1 時点からt2 時点へのOLI組成の変化
①OLIt0時点における St-nとΔSt0時点における戦略創出差分は、
②t0ΔENti = ti時点における戦略及びあらゆる外在的変数の t0時点との差分
③t1ΔEXt0= t1時点における全ての外在的な変数 EXのt0時点における差分
④戦略変更に生じた反応は、全て ΔEN、ΔEXに包含される変数となる

14. ★Theeclecticparadigmfurtheraversthatthesignificanceof
eachoftheseadvantagesandtheconfigurationbetweenthemis
likelytobecontextspecific,andinparticular,islikelytovary
acrossindustries(ortypesofvalue-addedactivities),regionsor
countries(thegeographicaldimension)andamongfirms.
★The eclectic paradigm is best regarded as a framework for
analysingthe determinants of international productionrather than
as a predictive theory of the MNE.
Framework for analysing
the determinants of international production:

15. I'd like tofinish by thankingyou for listening.