Theories and Paradigms of International Business Activity
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Theories and Paradigms of International Business Activity

The Selected Essays of John H. Dunning, Volume I

John H. Dunning

This volume contains a selection of John Dunning’s best known and highly acclaimed writings on the theory of international business activity. Spanning more than three decades, the 16 contributions trace the evolution of his thoughts and ideas as an economist, from his first article on the determinants of international production, published in 1973, to his most recent essay on relational assets, networks and global business activity, completed in 2002.
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Chapter 4: Explaining the International Direct Investment Position of Countries: Towards a Dynamic or Developmental Approach

The Selected Essays of John H. Dunning, Volume I

John H. Dunning


* I This chapter explores the proposition that a country’s international direct investment position, and changes in that position, may be usefully explained by the eclectic theory of international production. Using data on the direct investment flows (or changes in the direct capital stock) of some sixty-seven countries over the period 1967–78, it also suggests that there is a systematic relationship between the determinants of those flows and the stage and structure of a country’s economic development. II A country’s net international direct investment position is the sum of the direct investment by its own enterprises1 outside its national boundaries minus the direct investment of foreign owned enterprises within its boundaries.2 The eclectic theory suggests that this position, whether one is concerned with the stock of accumulated investment, that is, the direct capital stock, on changes in the stock over time, is determined by three sets of factors. The first is the extent to which its own enterprises possess, or can gain access to, assets or rights which foreign enterprises do not possess or to which they cannot gain access, at least on such favourable terms. Such assets are called ownershipspecific advantages3 in so far as they are assumed to be exclusive to the enterprise that owns them, and at least some of them are likely to be transferable (i.e. mobile) across national boundaries (Lall, 1980). The second is whether the enterprises possessing the assets perceive it to be in their best interests to internalise their use or sell this...

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