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Dunning (1977)Management > Global Firm > Lectures > Independent Research > Dunning > Market imperfections > OLI - OA > OLI - OA + LA
OLI - OA + LAOwnership advantages and Location advantages are interrelated. Ownership advantages are not location specific, whereas location advantages are. When developed countries invest in developing countries, location advantage is the key element, while an ownership advantage is unnecessary. When developed countries invest in other developed countries, an ownership advantage is required, as the nations’ location advantages will be equal. Innovation becomes an issue. In a developed country, such as the UK, education standards are higher than those in developing countries, and so people’s wages are expected to be higher. This means that investing firms can employ skilled workers to help improve their ownership advantages, but have their manufacturing plants in developing countries, where there is an abundance of unskilled labour. This shows how ownership advantages and location advantages are interlinked. “An act of MNE activity combines the export of intermediate products, requiring inputs in which the home country is relatively well-endowed, with the use of resources in which the host country is relatively well-endowed.”
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