Dunning (1977)

Management > Global Firm > Lectures > Independent Research > Dunning > Market imperfections > OLI - OA > OLI - OA + LA > OLI - I > OLI - I (market failure) > Tenets

Tenets

The difference between a firm which engages in international trade and that which engages in international production, is that the former’s value-adding activities will be in a single location and will export their final product, while the latter will disperse at least part of the production facilities into other countries.

Thus an MNE is one which has trans-border value-adding activities, while being able to govern and co-ordinate them efficiently.

The main tenets of the paradigm are:

1. Sustainable O advantages are those which are intangible, such as intellectual property and those which arise from “common governance of cross-border value-added activities” These help to raise entry barriers.
2. If 1 is satisfied, then these assets should not be sold, but be improved upon. These are known as “market internalisation (I) advantages”.
3. If 1 and 2 are satisfied, a firm needs to know if its O advantages can be applied cross-border.
4. If the top three are satisfied, the firm needs to know that OLI aligns with its global strategy.

OLI