Multinational buainess Essay Example | Topics and Well Written Essays - 2500 words

Multinational buainess - Essay ExampleAt the present economic environment such theories and models are considered to be very important as the importance of multinational organizations to the global economy has increased portentously. Dunnings eclectic paradigm theory is one of the most widely discussed theories in the world of international occupation. This paper attempts to present a clear description of this theory and several of its dimensions. The paper also includes a proper outline of the criticisms that the Dunnings model has faced over the years. There are several other theories on the similar subject and Dunnings theory can be compared with those to analysis the effectiveness of it. This paper includes such a comparative analysis that is likely to help an individual to have a clear conception regarding the full picture of such theories. Academic Literature John H Dunning is famous in the international business arena for his Eclectic Paradigm theory. It is actually the integrating of several theories on internationalization. It covers many mainstream theories such as Ohlin and Heckschers factor endowment theory, Coases trasaction cost theory, Hymers monopolistic expediency theory and internalization theory of Casson and Buckley. In 1976, Dunning presented the core concept of eclectic paradigm at Nobel Symposium which is located in Stockholm. The theory explains precisely why a firm should go global. Dunning attempted to provide a clear and complete explanation regarding international production. He has consistently supplemented and improved his theory in compliance to various developments in the global economic environment and also in accordance to several constructive criticisms. Dunning opined that there are three conditions that have significant influence over the firms decision regarding transnational production. In other words, a firm will involve in international production if these three conditions are met. The three conditions are 1) own ership-specific advantages, 2) internalization advantages and 3) location specific advantages (Dicken, 2007). Each of them is properly described below. self-command-Specific Advantages According to Dunning, an organization must have roughly ownership specific advantages which are not possessed by the rival organizations of other countries. The basis of this theory of Dunning lies in the Monopolistic Advantage Theory that was essential by Hymer. According to Dunning, ownership specific advantages must be sufficient to compensate for the costs of setting up and operating a foreign value-adding surgical operation in addition to those faced by indigenous producers or potential producers (Dunning, 1981). These advantages are like internal assets of a firm which is the sole owner of them. Ownership specific advantages can be gained from the factors like technology, knowledge, internal brands, human resources etc. (Dicken, 2007). In the words of Dunning, ownership specific advantages n eed not arise from multinationality (Perry, 1992). These advantages