GBE Individual Assignment
Question: Which theory do you think offers a better explanation of manufacturing FDI from developed country firms to developing countries: Dunning’s OLI paradigm or Vernon’s Product Life Cycle theory? Explain your answer fully.
Structure of the Document:
• Introduction.
• Explanation of Theories Related to FDI: Dunning’s OLI paradigm and Vernon’s Product Life Cycle theory.
• Conclusion.
• References.
INTRODUCTION
A FDI (Foreign Direct Investment) is the controlling of ownership in a business enterprise established in a country by the entities based in another country. Broadly, foreign direct investment includes "mergers and acquisitions, building new facilities, reinvesting profits earned from overseas operations …show more content…
This is the first factor of advantage which is considered at the time of evaluating FDI. It also involves the advantages of property rights for a firm over the other competitive firms. For a brand to become global brand it is important that the intellectual property (IP) right must be unique. Mainly the developed countries own the most IP rights in the form of highly advanced technology and highly educated skilled workers. In recent days these companies of developed countries are trying to build factors in the developing countries by attracting these with lower labor costs, lower product price and more competitive …show more content…
Internalization advantages refer to MNEs’ ability to efficiently internalize their ownership specific advantages to reduce the transaction cost during the international production. The MNEs prefer to transfer their privileged firm-specific advantages across national boundaries within their own organizations rather than sell them (Dunning, 1988), because the international firms could establish an internal market within their administrative fiat to avoid high and uncertain transaction cost caused by market failure (also called market imperfection). Internalization advantages indicated that ‘a set of circumstances whereby a corporation controls a market that other companies cannot’.The large amount of consumer demands and booming in the development of economies make developed country companies want to join the market in developing countries. However, the government trade policies for exporters are barriers to intervene the foreign business take part in, such as high tariff. The other barrier is hard for foreign company to get the market information based on language
Question: Which theory do you think offers a better explanation of manufacturing FDI from developed country firms to developing countries: Dunning’s OLI paradigm or Vernon’s Product Life Cycle theory? Explain your answer fully.
Structure of the Document:
• Introduction.
• Explanation of Theories Related to FDI: Dunning’s OLI paradigm and Vernon’s Product Life Cycle theory.
• Conclusion.
• References.
INTRODUCTION
A FDI (Foreign Direct Investment) is the controlling of ownership in a business enterprise established in a country by the entities based in another country. Broadly, foreign direct investment includes "mergers and acquisitions, building new facilities, reinvesting profits earned from overseas operations …show more content…
This is the first factor of advantage which is considered at the time of evaluating FDI. It also involves the advantages of property rights for a firm over the other competitive firms. For a brand to become global brand it is important that the intellectual property (IP) right must be unique. Mainly the developed countries own the most IP rights in the form of highly advanced technology and highly educated skilled workers. In recent days these companies of developed countries are trying to build factors in the developing countries by attracting these with lower labor costs, lower product price and more competitive …show more content…
Internalization advantages refer to MNEs’ ability to efficiently internalize their ownership specific advantages to reduce the transaction cost during the international production. The MNEs prefer to transfer their privileged firm-specific advantages across national boundaries within their own organizations rather than sell them (Dunning, 1988), because the international firms could establish an internal market within their administrative fiat to avoid high and uncertain transaction cost caused by market failure (also called market imperfection). Internalization advantages indicated that ‘a set of circumstances whereby a corporation controls a market that other companies cannot’.The large amount of consumer demands and booming in the development of economies make developed country companies want to join the market in developing countries. However, the government trade policies for exporters are barriers to intervene the foreign business take part in, such as high tariff. The other barrier is hard for foreign company to get the market information based on language