Question

Explain Dunning’s OLI framework as it applies to the existence of multinational corporations. Make sure to clearly explain why each of the components is important.

Answer 1

Answer:
Duning's OLI framework also known as eclectic paradigm, is a three tiered evaluation framework that companies usually follow when they want to determine if it is benificial to pursue Foreign Direct Investment (FDI). It has following three components

• Ownership : Ownership advantages include proprietary information and various ownership rights like patent rights, trademark etc. This is considered as intengible assets in companies protfolio. Taking example of multinational companies the advantage they get from FDI is that they are able to expand their branches without loosing the ownsership, until considerable shares are not been liquidated.
• Locations : Locations advantage is the second good thing about FDI or expanding the business. Taking example of multinational companies they can optimize to produce goods and services at different geographical locations where its efficient to get it build, for example if call center jobs are to be created for a particular companies developing countries would suite more than developed nation and vice versa.
• Internationalization : International advantage helps multinational companies in deciding what all things its economical to build in house and what all things it can be outsourced to outside third parties to focus solely on the main product whose development is the main aim of the organization.

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