The Contemporary Paradigm

 The Varied Paradigm Article

Reconciling internalization theory plus the eclectic paradigm

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Reconciling Internalization Theory plus the Eclectic Paradigm Alan M. Rugman

Fuzy: The varied paradigm of Dunning (1980) (with the OLI and 4 motives pertaining to FDI framework) can be reconciled with the firm and region matrix of Rugman (1981). However , the fit can be not excellent. The main reason for misalignment is the fact Dunning is focused upon to the outside FDI into host financial systems, whereas Rugman's matrix is good for firm-level approach covering MNE activity in both residence and sponsor countries. Keywords: internalization theory, Dunning's contemporary paradigm, firm-specific advantages, country specific positive aspects, multinational enterprises.


The field of international business has generally been produced over the last forty years through the information and command of David Dunning. At the University of Reading this individual built after the theory of internalization developed by his co-workers, Peter Buckley and Indicate Casson (Buckley and Casson 1976), to produce what is becoming known as the eclectic paradigm (Dunning 1980, 81, 1988). Collectively, internalization theory and the contemporary paradigm supply the cornerstones for the current theory of the multinational enterprise (MNE) (Verbeke 2009). They also give the intellectual footings for the rigorous theoretical and empirical analysis which in turn characterizes analysis on MNEs at what has become referred to as " Reading School” of international organization (Rugman 2009).

Alan Meters. Rugman can be described as distinguished going to Professor for Saint Paillette University and Editor-in-Chief of Multinational Organization Review. He can also a Mentor of International Business in Henley Business School, University or college Of Browsing, U. T. Email: a. [email protected] examining. ac. uk Acknowledgements: We am pleased to Steve H. Dunning for suggesting this daily news, and to Alain Verbeke, Draw Casson, Lorraine Eden, Rajneesh Narula, and other colleagues with the April 2009 Reading Meeting for very useful comments.

Joe M. Rugman



The contemporary paradigm has been developed by John Dunning in a series of guides (Dunning 1980, 1981, 1988, 1992). There are three factors that determine the foreign activities of multinational enterprises (MNEs). These are ownership (O) advantages, position (L) positive aspects, and internalization (I) advantages. Thus, the Dunning contemporary paradigm is also known as the OLI paradigm. The OLI paradigm explains facing outward foreign immediate investment (FDI). It suggests that MNEs develop competitive Um advantages at your home and then copy these overseas to specific countries (depending on L advantages) through FDI, that enables the MNE to internalize the O advantages. In contrast to the contemporary paradigm, internalization theory is principally used to clarify the choice of entrance mode. For instance , I advantages overcome the externality of knowledge as a community good, such that FDI is usually preferred to licensing, joint ventures, or perhaps alliances. (In all of the last three methods, there is a likelihood of dissipation from the firm's know-how advantage. ) Using Dunning's own reasoning, it is obvious that there is a close linkage among O and I advantages because a knowledge-type O benefits needs to be internalized. As will be shown listed below, this...


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