Dunning (2000)

Management > Global Firm > Lectures > Independent Research > Dunning > Outward FDI > OA

OA

In neo-classical economics, the firm is a "black box", where no FDI is possible. This stems from the assumption of a perfect market, where all firms have equal access to resources and capabilities at home, but it is too costly to invest abroad.

The eclectic paradigm identifies OAs, which can be used to overcome the costs of being foreign, with the assumption of an imperfect market. There are three accepted types of OA:

1. OAs which gain a firm monopoly power
2. OAs which come as a bundle of scarce, unique and sustainable resources, reflecting a technical efficiency better than its competitors
3. OAs which are the competences of the managers to co-ordinate resources and capabilities and turn them into competitive advantages

Changing OA boundaries

The relative importance of these three types of OA has changed over the last few decades. In the 1970s, a firm was competitive if it could internally produce proprietary assets and match these to market needs. Today, firms need to be able to organise knowledge intensive assets and integrate them with existing assets and with firms engaging in complementary activities.

Alliance capitalism has emerged, requiring firms to invest abroad to protect and augment, as well as exploit advantages. Thus an intangible asset needs to be multinational in its own right.

OAs are now dynamic as well as static, enabling future generation of profits.

Theories

Today's OAs

LA

Theories

I

Theories