《国际投资》课程教学资源（书籍文献）The eclectic paradigm as an envelope for economic and business theories of MNE activity.pdf

164 J.H.Dunning/International Business Review 9 2000)163-190 petitive advantages of the enterprises seeking to engage in fdi (or increase their existing fdi),which are specific to the ownership of the investing enterprises,i.e. their ownership(O)specific advantages.This sub-paradigm asserts that,ceteris par- ibus,the greater the competitive advantages of the investing firms,relative to those of other firms-and particularly those domiciled in the country in which they are seeking to make their i investme the more they are likely to be able to engage n creas their fo duction The the loc onal (of alter e countries or regi fo ing the di of MNEs.Th more the immobile,nat 0 with thei created owments,which firn own competitive advantag er than a nestic, n,the more advantages by The third sub-paradigm of the OLI tripod offers a framework for evaluati ing alter native ways in which firms may organize the creation and exploitation of their core competencies,given the locational attractions of different countries or regions.Such modalities range from buying and selling goods and services in the open market, through a variety of inter-firm non-equity agreements,to the integration of intermedi- ate product markets,and an outright purchase of a foreign corporation.The eclectic paradigm,like its near relative,internalization theory,avows that the greater the net benefits of internalizing cross-border intermediate product markets,the more likely a firm will prefer to enga age in foreign production itself,rather than license the right to do so,e.g.by a techn ical se rvic or franchise agreement,to a foreign firm. The eclectic paradigm 6 ther asserts that the of the OLI articular firn and the res nse of the firm to that config tion tual In articular,it will 月ct the nomic and eat of th of the ng f and of t n w the oinvest: he the orhe activity in which rms are engaged;th aracteristics of vidual inve nrms,including th bjectives and strategies in pursuing these objectives;and the raison d'etre f the fdi Regarding thi Ia: t contextual variable,scholars have identified four main types of foreign based MNE activity. 1.That designed to satisfy a particular foreign market,or set of foreign markets, viz.market seeking,or demand oriented,fdi 2.That designed to gain access to natural resources,e.g.minerals,agricultural pro- ducts,unskilled labor,viz.resource seeking,or supply oriented fdi. 3.That designed to promote a more efficient division of labor or specialization of an existing portfolio of foreign and domestic assets by MNEs,i.e.rationalized 3 As for eman set out in Buckley and Casson (1976.1985.1998).Hennart (1982.1989)a

164 J.H. Dunning / International Business Review 9 (2000) 163–190 petitive advantages of the enterprises seeking to engage in fdi (or increase their existing fdi), which are specific to the ownership of the investing enterprises, i.e. their ownership (O) specific advantages. This sub-paradigm asserts that, ceteris paribus, the greater the competitive advantages of the investing firms, relative to those of other firms — and particularly those domiciled in the country in which they are seeking to make their investments — the more they are likely to be able to engage in, or increase, their foreign production. The second is the locational attractions (L) of alternative countries or regions, for undertaking the value adding activities of MNEs. This sub-paradigm avers that the more the immobile, natural or created endowments, which firms need to use jointly with their own competitive advantages, favor a presence in a foreign, rather than a domestic, location, the more firms will choose to augment or exploit their O specific advantages by engaging in fdi. The third sub-paradigm of the OLI tripod offers a framework for evaluating alternative ways in which firms may organize the creation and exploitation of their core competencies, given the locational attractions of different countries or regions. Such modalities range from buying and selling goods and services in the open market, through a variety of inter-firm non-equity agreements, to the integration of intermediate product markets, and an outright purchase of a foreign corporation. The eclectic paradigm, like its near relative, internalization theory,3 avows that the greater the net benefits of internalizing cross-border intermediate product markets, the more likely a firm will prefer to engage in foreign production itself, rather than license the right to do so, e.g. by a technical service or franchise agreement, to a foreign firm. The eclectic paradigm further asserts that the precise configuration of the OLI parameters facing any particular firm, and the response of the firm to that configuration, is strongly contextual. In particular, it will reflect the economic and political features of the country or region of the investing firms, and of the country or region in which they are seeking to invest; the industry and the nature of the value added activity in which the firms are engaged; the characteristics of the individual investing firms, including their objectives and strategies in pursuing these objectives; and the raison d’eˆtre for the fdi. Regarding this last contextual variable, scholars have identified four main types of foreign based MNE activity4 : 1. That designed to satisfy a particular foreign market, or set of foreign markets, viz. market seeking, or demand oriented, fdi. 2. That designed to gain access to natural resources, e.g. minerals, agricultural products, unskilled labor, viz. resource seeking, or supply oriented fdi. 3. That designed to promote a more efficient division of labor or specialization of an existing portfolio of foreign and domestic assets by MNEs, i.e. rationalized 3 As, for example, set out in Buckley and Casson (1976, 1985, 1998), Hennart (1982, 1989) and Rugman (1982, 1996). 4 For an elaboration of these and other kinds of fdi (e.g. escape, support, and passive investments), see Dunning (1993) chapter 3, p. 61–3

JH.Dunning/International Business Review 9200)163-190 sequenti rial to it nvesti hms andor to reduce those of theit competitors,Le.strategic asser Combining our knowledge of the individual parameters of the OLI paradigm with that of the economic and other characteristics of home and host countries,and of the investing,or potentially investing,firms,it is possible to derive a wide range of fairly specific and operationally testable theories.Thus,it may be hypothesized that some sectors,e.g.the oil and pharmaceutical sectors,are likely to generate more fdi than others e g the iron and steel or aircraft sectors because the characteristics of the former generate more unique O advantages,and/or because their locational needs favor production outside their home countries.and/or because the net benefits of internalizing cross-border intermediate product markets are greater. Similarly.it is possible to predict that the significance of outward fdi will be eater for some Switzerland and the Netherlands.than for othe .g.Russia and India,simply by knowing about their e onomic histories the th of their ho markets onal thei capabil th Fin some firms same nationa rom the sa lustry,are more likely to engage in fdi others.Somet s,thi ect their size on the whole. large rms tend to more multinational than small firms;sometimes the ir attitude to risk paru cularly those associated with foreign ventures and of foreign partnerships with foreign firms;and sometimes their innovating product,marketing,locational,or fdi strategies. The extent and pattern of foreign owned production will depend on the challenges and opportunities offered by different kinds of value added activity.Thus the growth of existing,and the emergence of new,markets e.g.in China,over recent years,has led to a considerable expansion of various kinds of market seeking fdi- particularly in fast growing industries,e.g.telecommunications.By contrast,the rate of expansion of several natural resource sectors has been less impressive,as many products have become less resource intensive,due,for example,to the innovation of new alloy improved recycling techniques,the miniaturization of components,and the replac ment of natural by svntheti materials.The reduction of both tra artificial barriers to most for ms of trade has le to cy seeking fdi hoth mong develope d cou and betwee ed and deve Whil kinds of technology have become anagement contract ave repla d fdi. C.g in the hotel and s sectors,in the more knowledge and trade ntensive indus s The fo mainly in the form of the owth of horizontal,i.e.product specialization,and the latter in the growth of vertical,i..process

J.H. Dunning / International Business Review 9 (2000) 163–190 165 or efficiency seeking fdi. This type of fdi, though related to the first or second kind, is usually sequential to it. 4. That designed to protect or augment the existing O specific advantages of the investing firms and/or to reduce those of their competitors, i.e. strategic asset seeking fdi. Combining our knowledge of the individual parameters of the OLI paradigm with that of the economic and other characteristics of home and host countries, and of the investing, or potentially investing, firms, it is possible to derive a wide range of fairly specific and operationally testable theories. Thus, it may be hypothesized that some sectors, e.g. the oil and pharmaceutical sectors, are likely to generate more fdi than others, e.g. the iron and steel or aircraft sectors, because the characteristics of the former generate more unique O advantages, and/or because their locational needs favor production outside their home countries, and/or because the net benefits of internalizing cross-border intermediate product markets are greater. Similarly, it is possible to predict that the significance of outward fdi will be greater for some countries, e.g. Switzerland and the Netherlands, than for others, e.g. Russia and India, simply by knowing about their economic histories, the core competencies of their indigenous firms, the size of their home markets, their experience in foreign markets, and the locational attractions of their immobile resources and capabilities, relative to those of other countries. Finally, some firms, even of the same nationality and from the same industry, are more likely to engage in fdi than others. Sometimes, this might reflect their size — on the whole, large firms tend to be more multinational than small firms; sometimes their attitude to risk — particularly those associated with foreign ventures and of foreign partnerships with foreign firms; and sometimes their innovating product, marketing, locational, or fdi strategies. The extent and pattern of foreign owned production will depend on the challenges and opportunities offered by different kinds of value added activity. Thus the growth of existing, and the emergence of new, markets e.g. in China, over recent years, has led to a considerable expansion of various kinds of market seeking fdi — particularly in fast growing industries, e.g. telecommunications. By contrast, the rate of expansion of several natural resource sectors has been less impressive, as many products have become less resource intensive, due, for example, to the innovation of new alloys, improved recycling techniques, the miniaturization of components, and the replacement of natural by synthetic materials. The reduction of both transport costs and artificial barriers to most forms of trade has led to more efficiency seeking fdi — both among developed countries and between developed and developing countries.5 While, as some kinds of technology have become more standardized and/or more codifiable, licensing agreements and management contracts have replaced fdi, e.g. in the hotel and fast foods sectors, in the more knowledge and trade intensive indus- 5 The former mainly in the form of the growth of horizontal, i.e. product specialization, and the latter in the growth of vertical, i.e. process specialization

166 J.H.Dunning/Intermational Business Review 9 (2000)163-190 tries,e.g.pharmaceuticals,industrial electronics and management consultancy,the economies of global integration have made for a dramatic increase in merger and acquisition(M and A)activity (UN,1998).Moreover,the advent of electronic com- merce is not only heralding the end of the geography of some financial and infor- mation markets,but is revolutionizing the organization of intra-firm production and trade.? The ntent and predictions of the eclectic paradigm are firmly embedded in a r of diffe rent and b none thes mprene an ctivity, 8, 1g0 st of he he too,are c th h othe fdi. ocu erational production,.g.its ownership.strco on partic ocational pronl or its organizational form Thus,location theory forms the basis of the 'where'of MNE activity;industrial organization and resource based theories of the firm offer some reasons 'why'foreign owned affiliates may have a competitive edge over their indigenous competitors;while the concept of the firm as a 'nexus of treaties (Williamson,1990)is critical to an understanding of the existence of MNEs,and of why firms prefer to engage in fdi rather than sell their O specific assets,or the rights to use them.to independent foreign producers. Much of this paper will,in fact,seek to demonstrate how,and in what ways,these Approaches are complementary to each other and of how the cclectic paradigm offers lone of these theories and a co non analytical framework within which each can be accommodated and fully enriched in their pplication. Finally. the rele ance of the individual components of the eclec tic paradigm,and the system of which they are par will deper nd on whether c ng t o explain Such activity is estimated to have accounted for between5%and%of all new fdi ows over of intra-firm trade both of intermediate and of final products,docu- mented,for example.by UN(9b) or selling interme ate products (Bo ewyn,1985:Dunning,1988) a ysis,we s procee n that par son.1998b).While accepting the need for rigo and the empirical ting of specific hypothese we also believ ing related hypothes the interaction between the thepries but makes its ow e predictions.p ovides a useful.and in many cases,an es foundation to thes theories.We.ther ew the eclectic par digm as a which provides a s and bo criteria in w d MNE ated. erhaps,the most ive of the research tradition in interational business which has evolved ove

166 J.H. Dunning / International Business Review 9 (2000) 163–190 tries, e.g. pharmaceuticals, industrial electronics and management consultancy, the economies of global integration have made for a dramatic increase in merger and acquisition (M and A) activity (UN, 1998).6 Moreover, the advent of electronic commerce is not only heralding the end of the geography of some financial and information markets, but is revolutionizing the organization of intra-firm production and trade.7 The content and predictions of the eclectic paradigm are firmly embedded in a number of different economic and business theories. Although taken separately, none of these offer a comprehensive explanation of the growth and decline of MNE business activity,8 taken together — i.e. as a group — they do so. Most of the theories, too, are complementary, rather than substitutable, to each other. Some tend to focus on particular kinds of fdi, but not others. Others are designed to explain different aspects of international production, e.g. its ownership, structure, its locational profile or its organizational form Thus, location theory forms the basis of the ‘where’ of MNE activity; industrial organization and resource based theories of the firm offer some reasons ‘why’ foreign owned affiliates may have a competitive edge over their indigenous competitors; while the concept of the firm as a ‘nexus of treaties’ (Williamson, 1990) is critical to an understanding of the existence of MNEs, and of why firms prefer to engage in fdi rather than sell their O specific assets, or the rights to use them, to independent foreign producers. Much of this paper will, in fact, seek to demonstrate how, and in what ways, these approaches are complementary to each other; and of how the eclectic paradigm offers both an envelope of these theories, and a common analytical framework within which each can be accommodated and fully enriched in their application.9 Finally, the relevance of the individual components of the eclectic paradigm, and the system of which they are part, will depend on whether one is seeking to explain 6 Such activity is estimated to have accounted for between 55% and 60% of all new fdi flows over the period 1985 to 1997 (UN, 1998). 7 As witnessed, by the growth of intra-firm trade both of intermediate and of final products, documented, for example, by UN (1996b). 8 The explanation of foreign direct divestment by MNEs is exactly the reverse of that of foreign direct investment. It may be brought about by a decline in their O specific advantages and/or the L advantages of foreign countries, and/or a reduced motive by firms to internalize the cross-border market for buying or selling intermediate products (Boddewyn, 1985; Dunning, 1988). 9 Throughout our analysis, we shall proceed on the assumption that paradigmatic and model building theoretic structures to understanding international business activity are complementary rather than alternative scientific methodologies (Buckley & Casson, 1998b). While accepting the need for rigorous theorizing and the empirical treating of specific hypotheses, we also believe that encompassing related hypotheses into an open-ended and comprehensive conceptual framework, which not only identifies and evaluates the interaction between the theories, but makes its own generic predictions, provides a useful, and in many cases, an essential, foundation to these theories. We, therefore, view the eclectic paradigm as a systemic framework which provides a set of general assumptions and boundary criteria in which operationally testable theories, germane to fdi and MNE theory, can be comfortably accommodated. It is, perhaps, the most expressive of the research tradition in international business which has evolved over the past two decades (Weisfelder, 1998). For an elaboration of the concept of a research tradition, see Laudan (1977)

JH.Dunning/International Business Review 9200)163-190 6 the static or dynamicdete inants of MNE activity.For mple,one of the eories of fd ct cycle theory rd by ernon was cor not onl by wh h hr eepened an rkets how t ationa ds cha moved from the innovatory to the standardized stage of production.By contra much of extant location theory and internalization theory seeks to identify and explain the optimum spatial and organizational dimensions of the existing resources and capabilities of firms and nations.Knickerbocker's 'follow my leader,'and Grah- am's 'tit for tat'thesis(Knickerbocker,1973;Graham,1975)also contain a longi tudinal dimension,which,for the most part,is absent in most variants of industrial organization theory,for example as originally propounded by Hymer(1960)and Caves (1971).Initially,too,the eclectic paradigm primarily addressed static and efficiency related issues (Dunning.1977),but more recently has given attention to the dynamic competitiveness and locational strategy of firms,and particularly the path dependency of the upgrading of their core cor petencies(Dunning 1995.1998) The kernel of this r is directed to examining the changes in the boundaries constraints and structi of the eclectic paradigm over the and hos ng de anded of it by y world e nts and scholarly think- In do ial att to the of alli em ng (We 9931997:Mak 1999 199 a analysis in the e conte ur sign cant happenings of the 1980s and 1990s,viz. 1.the maturation of the knowledge-based economy, 3 2.the deepening integration of interational economic and financial activity,includ- ing that fostered by electronic networks (Kobrin,1999), 3.the liberalization of cross-border markets,and the flotation of the world's major currencies.and 4.the emergence of several new countries as important new players on the global economic stage The next three sections will examine how the main intellectual thrust in explaining each of the OLI triumvirate of variables has evolved over this time.In particular.it will argue that,as the dynamie of these variables significance.so the value of the eclec paradigm has increased relative to the s 10 See ale mationalization process (eg.Johanson For a longer term perspective,and particularly for an appreciation of the evolution of the O advan onal patterns and organ 7 A generic term which suggests that the wealth of firms and countries is increasingly dependent on the kind es they form with other firms and countries.This concept is explored in g1007e e in the develor ment of market based capitalism the previous two stages being land based and machine based capitalism

J.H. Dunning / International Business Review 9 (2000) 163–190 167 the static or dynamic determinants of MNE activity. For example, one of the earliest theories of fdi, viz the product cycle theory, put forward by Raymond Vernon (1966), was concerned not only with explaining the process by which firms deepened and widened their markets,10 but also how their locational needs might change as they moved from the innovatory to the standardized stage of production. By contrast, much of extant location theory and internalization theory seeks to identify and explain the optimum spatial and organizational dimensions of the existing resources and capabilities of firms and nations. Knickerbocker’s ‘follow my leader,’ and Graham’s ‘tit for tat’ thesis (Knickerbocker, 1973; Graham, 1975) also contain a longitudinal dimension, which, for the most part, is absent in most variants of industrial organization theory, for example as originally propounded by Hymer (1960) and Caves (1971). Initially, too, the eclectic paradigm primarily addressed static and efficiency related issues (Dunning, 1977), but more recently has given attention to the dynamic competitiveness and locational strategy of firms, and particularly the path dependency of the upgrading of their core competencies (Dunning 1995, 1998). The kernel of this paper is directed to examining the changes in the boundaries, constraints and structure of the eclectic paradigm over the past twenty years;11 and those now being demanded of it by contemporary world events and scholarly thinking. In doing so, it will pay especial attention to the emergence of alliance capitalism12 and the growth of asset augmenting fdi (Wesson 1993, 1997; Makino, 1998; Kuemmerle, 1999). In particular, it will set its analysis in the context of four signifi- cant happenings of the 1980s and 1990s, viz.: 1. the maturation of the knowledge-based economy,13 2. the deepening integration of international economic and financial activity, including that fostered by electronic networks (Kobrin, 1999), 3. the liberalization of cross-border markets, and the flotation of the world’s major currencies, and 4. the emergence of several new countries as important new players on the global economic stage. The next three sections will examine how the main intellectual thrust in explaining each of the OLI triumvirate of variables has evolved over this time. In particular, it will argue that, as the dynamic composition of these variables has assumed more significance, so the value of the eclectic paradigm has increased relative to the sum 10 See also the writings of the Scandinavian school on the internationalization process (e.g. Johanson & Vahlne, 1977; Luostarinen, 1979; Welch & Luostarinen, 1988). 11 For a longer term perspective, and particularly for an appreciation of the evolution of the O advantages of firms, and their changing locational patterns and organizational modalities, see two classic studies by Mira Wilkins (Wilkins 1970, 1974). 12 A generic term which suggests that the wealth of firms and countries is increasingly dependent on the kind and quality of alliances they form with other firms and countries. This concept is explored in more detail in Dunning (1995). 13 Which elsewhere (Dunning, 1997), we suggest represents a new stage in the development of market based capitalism, the previous two stages being land based and machine based capitalism