OLI Paradigm Research Articles

Internationalization of Enterprise Resource Planning Vendors

International business theory suggests that multinational corporations are usually disadvantaged compared to local firms when competing in a host market. However, we find that foreign enterprise resource planning (ERP) vendors in the Chinese high-end ERP market perform significantly better than local vendors. To understand this gap, the authors first analyze the ERP business model and its four characteristics as a service and use Dunning's OLI paradigm to specify the ownership-specific, internalization-incentive, and location-specific advantages (O-, I-, and L-advantages) required for foreign ERP vendors to compete in the host country's high-end market. Then, after conducting case studies of the two foreign vendors with the highest share in the Chinese high-end ERP market, SAP and Oracle, they confirm that the O-advantages from strong brand and reputation, high research and development capabilities, professional partners, I-advantages from wholly owned subsidiaries, and L-advantages from economically developed regions cause SAP and Oracle to excel in the Chinese high-end ERP market.

Determinants of Foreign Direct Investment and the Advantages Theory

This study reviews three classic international business theories and some related empirical studies to identify the gaps in the literature and suggest future research directions. In international business studies, most analyses on the determinants of FDI are centered on three concepts of firm-specific, internalization, and location advantages according to the monopolistic advantage theory, internalization theory, and OLI paradigm. These three advantages determine whether a firm will internationalize, how it will enter foreign markets, where it will locate in the host country, and how it will perform in a foreign market. However, These theories are set up with the premise of firm-specific advantages and cannot be used to explain the phenomenon of emerging market multinational enterprises, which have emerged in large numbers in recent years. Simultaneously, these theories, which focus on manufacturing, need to be used to explain the internationalization of the service industry in-depth and with greater relevance.

Performance feedback and location choice of foreign direct investment

Integrating the behavioral theory of the firm and the OLI paradigm, this paper studies how performance feedback affects the location choice of emerging market firms between developed countries (DCs) and less developed countries (LDCs) during the process of internationalization. Using the sample of 1,306 Chinese public listed firms which established new foreign subsidiaries between 2008 and 2019, we find that the further a firm’s performance is below aspiration, the more likely it will invest in LDCs than DCs, whereas the further a firm’s performance is above aspiration, the more likely it will invest in DCs than LDCs. In addition, technology-based capability and labor intensive production capability have moderating effects on the relationship between performance feedback and location choice between DCs and LDCs. This paper complements and extends the OLI paradigm by injecting dynamic and non-economic factors to explain OFDI location choice.

POLI advantages of state-owned multinationals

Purpose The authors revisit the traditional OLI paradigm with the objective to allocate politics within the set of internationalization advantages by building on the political strategy literature. The authors outline the specific role of political advantage that facilitates and propels the international expansion of state-owned multinational enterprises (SOMNEs) from emerging markets.Design/methodology/approachA conceptual paper which explains the role of political advantage in the internationalization of SOMNEs. The authors expand the scope of the OLI to capture the impact of firms' home governments' policies and relationships with host countries which are leveraged by SOMNEs in their internationalization.Findings The authors define political advantage as a new type of advantage which depends on and is sourced from external actors. The authors argue that P-advantage is a multifaceted and unstable part of POLI composition, which is contingent on political shifts and may be leveraged by various firms. The authors also assert that political capabilities have limitations in sustaining political advantage, which may be compensated via enhancing the political activity of firms.Originality/valueThe authors conceptualize the POLI-advantages paradigm for the internationalization of SOMNEs by proposing that in addition to the traditional ownership, location, and internalization advantages, firms can capitalize on their political advantage to enter markets where internationalization might have been difficult without their political connections.

Strategic choices of an MNE in an emerging market: the case of Perfetti Van Melle

ABSTRACT In this paper, I examine the strategic choices of an Italian DMNE Perfetti Van Melle (PVM) in an emerging market using Dunning’s OLI paradigm and Ghemawat’s AAA framework. I seek to explicate the ‘how’ and ‘why’ of the strategic choices made by PVM in a resource-constrained environment marked by institutional voids. I find that PVM gained sustained competitive advantage by leveraging its unique ownership advantages and the locational advantages bestowed by India. In doing so, PVM adapted its business model and aggregated its globally recognized best practices to succeed in a complex and hyper-competitive market like India. Further, I also find evidence that PVM successfully recombined its market-seeking ambition with a huge prospective consumer base that sought global brands and quality products.

Does the Carbon Emission Trading Policy Promote Foreign Direct Investment?: A Quasi-Experiment From China

As an important policy to promote global energy transition and carbon emission reduction, does the carbon emission trading policy help promote foreign direct investment inflows, thus alleviating the contradiction between environment and economic development? Based on the “OLI paradigm,” by using the data of China’s 30 provinces from 2007 to 2016 and taking China’s pilot implementation carbon emission transaction policy in 2013 as the natural experiment, so as to construct a differences-in-differences model, this study empirically analyzed the impact of carbon emission transaction policies on foreign direct investment and conducted an in-depth analysis and discussion on related heterogeneity. The empirical results show that 1) there is a positive correlation between the carbon emission trading policy and foreign direct investment; 2) the results of heterogeneity analysis show that the effect of carbon emission trading policy on the increase in FDI is more significant in the areas with a stronger environmental regulation, a higher degree of marketization, and low energy consumption. The conclusions of this study enrich the analysis of the effectiveness of government environmental policies from the perspective of both environment and economic development and provide relevant policy enlightenment for developing countries in environmental regulation and attracting foreign direct investment.Systematic Review Registration: [website], identifier [registration number].

Арктические корпорации и освоенческие риски: вызов и ответ

The realities of the Russian Arctic in recent decades make it possible to determine a special phenomenon of corporate development risks, which can be structured into resource, institutional and ecosystem risks. The resource risk reflects the contradiction between the conjuncture of the global resource markets and the specific conditions for the development of unique deposits located in the Arctic zone; institutional risk — between federal norms and rules for the development of natural resource deposits and local specific conditions for the construction and operation of resource facilities in the Arctic; ecosystem risk reflects the contradiction between large-scale economic activity and the fragility of Arctic natural systems. As a result of a comparative assessment of the development risks of three Arctic corporations in Russia, it was found that the highest risk is typical for the facilities of Norilsk Nickel, the lowest — for NovaTEK, and Gaz-promneft is in the middle. Using the OLI paradigm of John Dunning, it can be argued that Arctic corpora-tions respond to the challenge of development risks by adapting their spatial, institutional and organiza-tional structure to the conditions for the development of resources and resource territories. The spatial factor is most efficiently used by Norilsk Nickel, then NovaTEK, in the strategy of adaptation to develop-ment risks, with the receipt of benefits from localization and the creation of a regional cluster, while Gaz-promneft is the least effective. The institutional factor is most effectively used by NovaTEK and Gazprom-neft, and the least by Norilsk Nickel. The organizational and structural factor as a tool for adapting to risks is most skillfully used by Gazpromneft, weaker — by NovaTEK and Norilsk Nickel. Integrally, the best positions in the strategy of adaptation to development risks are held by Gazpromneft, and the worst positions by Norilsk Nickel, which has the most significant contrast between the size of development risks and the means of adaptation to them. Strengthening the internal competencies of the company and its corporate innovation system is the most important way to successfully cope with the high risks of corporate development of resources and spaces of the Arctic.

Strategic view of internationalization process, a case study

This study aims at examining the Slovenian airdrome multinational corporation construction Company, in OLI paradigm factors, notably focusing on how the OLI paradigm can be utilized to explain the course of the company for the decision of internationalization production. The major outcome of this study demonstrates that among the OLI paradigm, ownership and location advantages can best explain the Company’s internationalization of production as the Company has the monopolistic advantage in production airdrome in Balkans, at old Soviets countries, and the Middle East and those regions present locational advantage because of their effective demand capacity, low labor costs, free entry markets.

Foreign Direct Investment and Indian Export Performance: An Empirical Study

In terms of International Economics, FDI inflows have the potentials of enhancing the exports of manufactured goods produced in the host nation. In the context of India, depending on the methodology applied, the scholars obtain conflicting findings. Authors argue that if FDI, as variable, can explain export performance, then the sectors receiving higher proportions of FDI should be dominant exporters. Empirical findings fail to prove it. In fact, industries dominating the export-pie are the industries of Indian comparative advantage. If MNCs focus on the profits of grabbing the local market, the incentive for the exports appears weak. As per OLI Paradigm, Multinational Enterprises take the FDI strategy to overcome the difficulties of cross-border trade, not to enhance cross-border trade. Therefore, if the country wants FDI to augment export earnings, following the line of Malaysia and Thailand, it should pursue the strategy of permitting inflow of export-oriented FDI only.

Do Chinese firms benefit from government ownership following cross-border acquisitions?

Chinese firms’ increasing cross-border acquisitions (CBAs) in recent years seem to challenge the explanatory power of received theories of multinational enterprise (MNE) due to their relatively unique characteristics and the active role of the Chinese government. In this study, we seek to revisit and contextualize the OLI paradigm in conjunction with the institution-based view and examine how Chinese firms’ post-CBA long term performance is associated with government ownership. Our study shows that Chinese firms with more government ownership demonstrate better post-CBA long term performance. However, the above relationship is differentially moderated by such firm-level boundary conditions as political connections and financial slack, and the country-level institutional boundary conditions (i.e., the host country formal institutions and the home-host country cultural distance). We discuss our findings in detail and explore theoretical and practical implications for both Chinese firms and other emerging economy (EE) firms.

The survival of the fittest in the global markets: multinational corporation challenge, evolution and decline

PurposeThe purpose of this perspective paper is to answer the question of why some multinational corporations (MNCs) do not evolve and fail to avoid retrogression by natural selection in international business (IB) and to introduce eight papers selected for this special issue.Design/methodology/approachThe authors conceptually discuss the reasons for MNC failure by illustrating key motivations behind foreign direct investment (FDI) undertaken by MNCs based on internalization theory, the OLI paradigm and the OILL (i.e. OLI plus the learning motivation) paradigm. Then, the authors develop an evolutionary perspective to explore the survival of the fittest in the global markets and the natural selection of MNCs.FindingsThe eight papers selected for this special issue expand the authors’ understanding of globalized organizations' challenges, evolution and decline as well as offering a distinct opportunity to reconsider diverse extant theories about MNCs by suggesting an extension that accounts for the rise of various globalized organizations particularly in and from emerging markets.Originality/valueDespite increased numbers of MNCs, which struggle to survive and are faced with great risk of failure, the authors’ understanding of them still remains in infancy. While scholars have investigated diverse topics related to MNCs, existing studies have developed theories predominantly emphasizing MNC success. Thus, conventional theories in IB such as internalization theory and the OLI paradigm may not be sufficiently applicable to explain the phenomenon of MNC failure (i.e. MNC decline). Based on authors’ discussions, the authors believe this is an appropriate time to refine mainstream IB theories by concurrently considering both evolution and retrogression.

The distinct contribution of investment promotion agencies’ branch offices in bringing Chinese multinationals to Europe

This study uncovers the distinct contribution of investment promotion agencies’ (IPAs) overseas branch offices in advancing and even creating foreign direct investment. It offers a novel categorisation of IPAs depending on location and headquarter/branch status, and conceptually connects the known functions of IPAs with the advantages set out by the OLI paradigm. Empirical examination of longitudinal data from 29 European IPAs finds that the activities of their branches in China instilled greater awareness and confidence in Chinese multinational enterprises about their ownership- and European location-specific advantages. This contribution of IPA branches is especially salient in emerging economies with newcomer investors.

The OLI Paradigm as a comprehensive model of FDI determinants: a sub-national approach

PurposeThis study aims to advance a sub-national perspective within the OLI Paradigm by analyzing how and to what extent the Eclectic Paradigm can serve as a general model to capture region-specific aspects of the location determinants of FDI, encompassing institutional effects that extend beyond the quality of institutions.Design/methodology/approachThe authors conducted a systematic literature review of 41 selected papers published between 1990 and 2019. Using inductive content analysis, they investigated the theoretical choices used to support analyses of the effects of institutional factors on MNEs' location decisions at the sub-national level.FindingsIt was found that, when changing from the national to the sub-national level of analysis, there is no need to change the main assumptions used in the literature, although a different perspective must be adopted. The Eclectic Paradigm permeates most of the studies revised and can serve as a general model to capture the sub-national perspective. It offers a foundation for new perspectives on the dynamics of institutional and political factors and their effects on location strategies and determinants at the sub-national level. Adopting the OLI Paradigm with a sub-national approach could widen the IB literature's prevailing focus on traditional economic factors and institutional quality.Research limitations/implicationsThe authors contribute to extant International Business literature Their paper enhances the literature on FDI location determinants by providing a more specific approach to development of a sub-national perspective within the OLI Paradigm, extending the institutional effects to capture more region-specific factors influencing the location of FDI. Study limitations are related to our analytical focus on the location dimension, excluding motives for FDI or firm-level location strategies. Rather than limiting analysis to quantitative studies, future research that includes qualitative studies and also covers the other dimensions of the OLI Paradigm could open additional new research avenues for advancing the sub-national perspective within the field of IB.Practical implicationsThe authors’ main findings suggest that MNEs' location strategies should include a sub-national perspective, which means that firms need to assess different levels of the location and understand their interaction with nationwide constraints and limitations, as it may affect firms' ability to effectively conduct their value-adding activities. They also contribute elements that can support sub-national governments' actions and policies aiming to enhance locational advantages to attract and retain FDI.Originality/valueThis review specifically analyzes the location determinants of FDI at the sub-national level, in studies published in a broad set of journals, from a variety of fields, prioritizing articles that investigate sub-national institutional determinants. The authors derive implications for the International Business literature and propose that the sub-national dimension should be incorporated into the Eclectic paradigm in order to better understand the influence of institutional sub-national determinants.

FDI inflows and intellectual property rights for MNEs in emerging markets: an alternative approach through the lens of trademarks in Vietnam (1986-2016)

PurposeWhile the current anti-globalisation wave is considered as a regional and cyclical relapse among Western countries, the new era of globalisation has shifted away from stagnant developed economies towards the rising prosperity of emerging Asia, where it is attracting substantial global inward foreign direct investment (FDI). Focussing on Vietnam, the country that is seen as Asia’s next economic tiger, the question of how important intellectual properties (IP) protection is in the international competition for FDI inflows is still unsettled, especially on the under-researched topic of trademarks.Design/methodology/approachThis paper takes on the business history approach, which allows rich evidence from the dynamic and evolving natures of multinational enterprises (MNEs) to drive the research process, so that international business scholars can test models rigorously. The evidence provided in this paper is essentially qualitative and combines trademark registrations data, with trade and FDI statistics between 1986 and 2016, also draws on companies’ archives, industry reports and related newspaper articles.FindingsThis paper provides the chronology of intellectual property right (IPR) legal landscapes and the dynamic co-evolution of trademarks and FDI inflows in Vietnam. Three trademark protection strategies for MNEs and their patterns here are addressed. The paper also argues that trademarks bring new insights and IP protection strategy for pharmaceutical MNEs for the case of Vietnam is as important in trademarks as it is in patents. In emerging markets with strong incentives for FDI such as Vietnam, MNEs are not necessarily put off by weak IPR, but rather create alternative strategies for dealing with the lack of IP protection in these emerging market settings.Originality/valueThis study challenges the stream of thoughts that view trademarks as a “neglected intangible asset” among different IPRs, while in fact, trademarks advance MNEs’ knowledge by ensuring competitiveness and long-run survival in emerging markets. This paper is among the first few attempts to look at pharmaceutical industry through the lens of trademarks, moving away from the traditional patent-focussed approach. It extends the understanding of OLI paradigm and highlights that MNEs need to possess Oa and Op advantages not only at the beginning of internationalisation process but rather evolving through the time to cope with imitation risks in the host country.

Motivations for Outward FDI from Emerging Economies to Advanced Economies: A Literature Review

Outward Foreign Direct Investment (FDI) from emerging economies in recent years has experienced rapid growth, especially from the BRIC (Brazil, Russia, India, and China) economies. This has gained much attention from international business researchers. The present study assessed the motivations for the outward FDI from emerging economies to advanced economies based on literature review. The paper revealed that market seeking, natural resource seeking, strategic asset seeking, efficiency seeking, and home government support motivate firms from emerging economies to invest in advanced economies. However, efficiency seeking least motivates China’s outward FDI due to its low labour cost. The study also made an evaluation of the existing theories of FDI to determine whether they adequately explain such investments. Based on the evaluation, the OLI Paradigm and the ResourceBased View do not adequately provide a plausible explanation for such investments. However, emerging economies outward FDI to advanced economies seemed to be adequately explained by the Institutional Theory.

New institutional economics: contributions to international business studies

Purpose The purpose of this paper is to analyze the main contributions of the new institutional economics to the international business (IB) arena. It also intends to show how the NIE is being incorporated to both eclectic paradigm and Uppsala school’s view, and how it is modifying them. Design/methodology/approach A range of IB articles, which contained an institutional view and also discussed the eclectic paradigm or the Uppsala school, provides the background to build a framework. Findings This paper proposes a framework showing the impact of the institutional variables on the internationalization of firms, by addressing both the OLI paradigm and Uppsala school. It also concludes that the institutional theory has been a point of intersection between the OLI paradigm and Uppsala school, since both have been renewed to understand the transaction costs borne by the firms in their international learning process and in the search for less asymmetrical information. Research limitations/implications This paper provided a brief discussion about the institutional components. Practical implications This study is a useful source of information for those who want to discuss the institutional impact in the IB arena and emerging markets. Originality/value This paper summarizes how the OLI paradigm and Uppsala school encompassed the institutional variables. It also presents a framework that allows new study possibilities since the understanding of the influence of institutional variables on the international movements of firms is still cloudy.

Chinese multinationals’ FDI motivations: suggestion for a new theory

PurposeThe purpose of this paper is to complement the conventional international business (IB) theory, the OLI perspective, which is good at explaining the foreign direct investments (FDIs) undertaken by developed market multinational corporations (DMNCs). This study also suggests a new theoretical framework, namely, the OILL paradigm, that is able to encompass FDIs from emerging market multinational corporations (EMNCs) toward developed economies.Design/methodology/approachThe data comprising 206 Chinese MNCs, which completed international mergers and acquisitions (IMAs), were obtained from Zephyr. By using these data, logical regressions are conducted to statistically confirm that we should not omit the learning motivation if we want to adequately understand the FDI phenomenon by encompassing investment flow from developing (or emerging) to developed countries.FindingsThe results based on this data set indicate that EMNCs often try to enter developed economies with the motivation to seek sophisticated foreign host knowledge that is not available internally. In particular, they tend to use IMA strategies when they want to learn from heterogeneity (i.e. inter-industry mergers and acquisitions) and absorb advanced technologies from DMNCs.Research limitations/implicationsBy shedding light on the recent new trend in FDI (i.e. FDI from emerging countries to developed economies), the study provides useful theoretical implications, as well as suggesting scholarly contributions. However, we should acknowledge that there are some limitations to this study. First, the study explores only Chinese MNCs. Second, learning motivations need to be minutely and precisely measured by other studies. Third, this study argues that FDI from EMNCs to DMNCs is triggered by the former’s motivation concerning knowledge acquisition. However, the type of knowledge should be considered, and this is perhaps another avenue for future research.Practical implicationsConventional IB theories, such as the OLI paradigm and internalization theory, have long sought to answer the question of why DMNCs go for foreign markets, in spite of the presence of the liabilities of foreignness, and focused on their main investment motivations (i.e. market-seeking, efficiency-seeking and resource-seeking motivations). For this reason, these theories do not adequately capture the primary FDI motivations of EMNCs, and consequently, they are unable to see the big picture when it comes to the FDI phenomenon. Based on this idea, the authors complement the well-known triad motivations (i.e. market-seeking, efficiency-seeking and resource-seeking motivations) by adding the knowledge-seeking motive and contribute to the evolution of IB theories by suggesting a new theory, which is the OILL paradigm.Originality/valueThe study contributes to the extant literature in the field of IB in two key ways. First, it examines EMNCs’ central motivations in conducting FDI where empirical research is sparse. By doing this, this paper attempts to solve the query indicated above (i.e. why MNCs choose FDI in spite of the presence of the liabilities of foreignness), and it offers a new theory (i.e. the OILL paradigm).

FACTORS INFLUENCING INDIAN FIRMS DECISION MAKING IN FOREIGN DIRECT INVESTMENT IN AFRICA

India’s economic progress and relations with other developing regions have received much attention, particularly the way in which Indo-African relations have evolved since 2000. This paper aims to put Indian FDI in Africa into perspective and provide some answers on the nature and possible impact of these flows to the continent. The study utilized the international typology offered by Dunning OLI paradigm to identify the important of Location Specific Advantages and how these advantages leads to selection of location for investment purposes by investors The study findings demonstrated that potential market growth, market opportunities and consumer base are the important indicated Indian firms targets Africa to seek new and unexplored markets of Africa. Competitiveness climate is important determinant along with economies of scale, investment incentives and availability of natural resources.

Innovating in a Digital Economy: Challenges for Global Strategy and Entrepreneurship Research

The rise of digital economy is reshaping the traditional conceptualization of international business and entrepreneurship. Instead of being constrained by lack of physical assets or cross-national differences, “born-globals” in cyberspace cost-efficiently innovate digital products and instantly distribute them to users around the world via online channels. The revenue models are also in flux, as businesses are relying on freemium and sponsor based business models instead of charging users. Such unique aspects of digital economy require substantial reevaluation of current theoretical frameworks, such as Uppsala Model, OLI paradigm and liability of foreignness. The challenges of a digital world also present important venues for scholarly enquiry as digital businesses face barriers of user adoption, liabilities of outsidership, retaliation by traditional businesses, increasing regulations by governments and stiff competition from around the world. Our panel aims at catalyzing the discussion on the intersecti...

The effects of conventional and unconventional FDI on the host country

PurposeThe purpose of this paper is to analyze and compare the effects of conventional and unconventional FDI on the host country in a more comprehensive and systematic way.Design/methodology/approachBoth the OLI paradigm and the imbalance theory are linked to the diamond model in order to compare the effects of conventional and unconventional FDI on the host country. This methodology is then applied to the real world as a case study, FDI toward the Korean automobile industry.FindingsConventional FDI is often said to be more beneficial to the host country than the unconventional type. However, the actual effect of unconventional FDI is shown to be more positive with better management and is often larger than perceived. Therefore, unconventional FDI emerges as important as conventional FDI for sustainable economic development.Practical implicationsIn general, unconventional FDI has often been criticized severely because of misperceptions derived from the dominance of conventional FDI on theoretical aspects, incomprehensive perspectives toward assessing the effects of FDI, and negative political views. Therefore, rigorous and holistic case study analyses based on solid analytical tools are needed in order to better understand the effects of unconventional FDI and to draw up effective and proper FDI promotion policies.Originality/valueThis paper provides a way to better understand the effect of unconventional FDI on the host country comprehensively and systematically by expanding and deepening existing theories. Based on this, the effects of conventional and unconventional FDI on the host country are compared theoretically and empirically, particularly with the case of the Korean automobile industry.