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International investment trade theories P199-200 - Coggle Diagram
International investment trade theories P199-200
Ownership advantages theory
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'A firm owning a valuable asset domestically can penetrate foreign markets through FDI'
That asset could be economies of scale or the level of technology
Internationalisation theory
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Firms are more likely to globalise and invest in a manufacturing site, for example, if it is cost beneficial
Toyota have a manufacturing site in Derby
High labour costs, but there is no costs to import cars from China to UK
They have access to a high human capital labour force
A firm would also consider franchising their brand depending on costs
Dunning's Electric theory
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This theory combines ownership, location & internationalisation advantages
Ownership advantage
A firm must own some unique competitive advantage that overcomes disadvantages of competing with foreign firms on their home turf
IE level of technology
Location advantage
It must be more profitable in foreign location than in domestic location
IE lower labour costs
Internationalisation advantages
The firm must benefit from controlling the foreign business activity than from hiring an independent company to provide the service
The independent company may tarnish the brand through their practices in that market
