UNDERSTANDING DUNNING’S OLI PARADIGM

Abstract

OLI (Ownership, Location, Internalization) Paradigm or Eclectic Paradigm developed by John Dunning provides a holistic framework to identify and evaluate the significance factors influencing foreign production by enterprises and the growth of foreign production. The idea of OLI was first conceived, by Prof. Dunning, after witnessing 2 to 5 time’s higher labour productivity of US manufacturing industry in UK’s industry, when the US affiliates in UK were no better than their UK competitors, and much poorer than that of their parent companies. Subsequently Dunning developed the Ownership specific, Location specific and Internalization advantages of an MNE (Multinational Enterprises), which became the OLI Paradigm, which explains the reasons for differences in international production. Time and again Dunning himself assessed the practical applicability of this paradigm to the dynamic situations of international activities of MNEs, where he proved to be successful. This paper reviews the OLI Paradigm explained under different dimensions of MNE activities and makes an attempt to understand the ides of Dunning on international production.