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In the paper "The mechanism of internationalization" ([55] Johanson and Vahlne, 1990) we responded to some suggestions that we should discuss how the Uppsala model is related to the eclectic (OLI) paradigm and, perhaps, integrate the model in the framework of the paradigm. The result of our discussion was "the two frameworks in their present shape are inconsistent as the basic assumptions are so different" (p. 16). Once again we are now discussing the basic assumptions of the frameworks. As a result we now present an alternative paradigm based on the Uppsala model.
The eclectic (OLI) paradigm "has been widely recognized as the preeminent theoretical paradigm within IB" ([19] Cantwell et al. , 2010, p. 567). It has its roots in economic theory, as is indicated by [280] Dunning's perspectives on international business research (2002). There he mentions a number of economists specialized on studies of international corporations - Kindleberger, Vernon, Hymer, Aliber and Caves - who seem to have played an important role for him during the period before the emergence of the eclectic paradigm. With this background it is no wonder that the assumptions, on which the eclectic paradigm is built, primarily aim at explaining the functioning and structure of the wider economic system and not the organization and activities of the individual firm.
Consider, for example, the internalization advantage, a central element in the eclectic paradigm, which is based on an explanation of the existence of multinational enterprise (MNE) as a consequence of market failure ([15] Buckley and Casson, 1976). Following [21] Coase's (1937) explanation of the existence of the firm in general, it assumes that the firm controls and coordinates resources that it owns while the use of other resources is governed by the market mechanism. According to other theories it can, however, be argued that under certain, not unusual, circumstances firms cannot fully control the use of their own resources and that in some situations they can exercise some control over resources of other firms ([32] Emerson, 1962; [79] Pfeffer and Salancik, 1978; [35] Forsgren, 1989). If so, the internalization advantage rests on unrealistic assumptions.
In a discussion of the assumptions of economic theory [38] Friedman (1953) argued that the realism of assumptions is irrelevant. Their value depends on the...