UGF Lecture 2

Management > Global Firm > Hymer > FDI > Hymer's criticisms > MNE theory

MNE theory

Hymer suggested that the decision to set up value-adding operations abroad depended on the industry and certain aspects of individual companies, rather than the country and national capital availability.

Some countries did indeed have more FDI than others, but this was argued to be more to do with the non-capital strengths of competitive firms, which included strong technologies and good education.

The MNE theory has two points:

1. Firms become MNEs due to their possession of a competitive advantage and their ability to maximise their productivity by using this competitive advantage in another country. This leads to the concept of ownership advantages as discussed later by Dunning.
2. The competitive structures of some industries would encourage firms to internationalise more than those in other industries. For example, concentrated industries (an oligopoly) would be most likely populated by MNEs.