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ABSTRACT
OLI (Ownership, Location, Internalization) Paradigm or Eclectic Paradigm developed by John Dunning provides a holistic framework to identify and evaluate the significance factors influencing foreign production by enterprises and the growth of foreign production. The idea of OLI was first conceived, by Prof. Dunning, after witnessing 2 to 5 time 's higher labour productivity of US manufacturing industry in UK's industry, when the US affiliates in UK were no better than their UK competitors, and much poorer than that of their parent companies. Subsequently Dunning developed the Ownership specific, Location specific and Internalization advantages of an MNE (Multinational Enterprises), which became the OLI Paradigm, which explains the reasons for differences in international production. Time and again Dunning himself assessed the practical applicability of this paradigm to the dynamic situations of international activities of MNEs, where he proved to be successful. This paper reviews the OLI Paradigm explained under different dimensions of MNE activities and makes an attempt to understand the ides ofDunning on international production.
Keywords: OLI Paradigm, MNEs, MNCs, International Production, Foreign Direct Investment.
JEL Classification Code: F21, F23
Introduction:
The literature of International Economics in the recent times is highly dominated by the diverse operational aspects of Multinational Enterprises (MNEs). Crossborder activities of the multinationals in goods and factors of production make them fall under the broad category of international economics. In the process of undertaking such activities, they create and transfer new skills and technologies, which make them to enter into theories pertaining to economic development. Sharing of costs and benefits between countries within their operations makes them to fall under the perspective of welfare economics. MNCs (Multinational Corporations) flexible operation adds new dimensions to the theories of industrial relations. All of the above ultimately help to enrich the monetary and fiscal activities and policies of governments which in due course lead into the enrichment of the economy and society as a whole. There is a host of theories which attempt to explain the reason and purpose for the existence of MNEs, which answers some of the fundamental questions like: a) what motivates national firms to go and produce abroad?, b) what enables them to do so, c) why do MNEs undertake different forms of investments abroad.
Many theories make...