Framework

Dunning's eclectic (OLI) paradigm

The question it answers

When a leadership team plans to sell abroad, should the firm invest in its own production there, or simply export or license to a local partner?

Origin
Dunning, 1980; 1988
Diagram type
Decision flow
Level of analysis
Firm
Topics
Entrepreneurship & innovationStrategy & leadership
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Diagram

Dunning's eclectic (OLI) paradigm

  1. ODoes the firm own an advantage foreign rivals lack?No basis for investing abroad
  2. LDoes the host country offer location advantages worth producing there?Serve it by exporting
  3. IIs it cheaper to run the activity in-house than through the market (licence, contract)?License or partner
FDI is the fitting entry mode

Pitfalls

Pitfall

It is sometimes stated that a firm needs an advantage in "one or more" of the three; the standard statement of the paradigm requires all three. Use the stricter version (Dunning 1988). The four seeking motives are market, resource, efficiency or factor, and strategic asset.

Sources

References

Listed A–Z by author surname, Harvard style. A source with a DOI links to https://doi.org/…; one without links to its page or says plainly that it has no DOI.

  1. Dunning, J.H. (1980) ‘Toward an eclectic theory of international production: some empirical tests’, Journal of International Business Studies, 11(1), pp. 9–31.doi:10.1057/palgrave.jibs.8490593Source page
  2. Dunning, J.H. (1988) ‘The eclectic paradigm of international production: a restatement and some possible extensions’, Journal of International Business Studies, 19(1), pp. 1–31.doi:10.1057/palgrave.jibs.8490372Source page