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Extending the Eclectic Paradigm in International Business

Essays in Honor of John Dunning

Edited by H. Peter Gray

John Dunning is undoubtedly the world’s leading scholar on the subject of multinational corporations and international business. This collection of original essays is designed to honor this work, particularly his achievements during his association with Rutgers University.
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Chapter 2: A Variant of the Eclectic Paradigm Linking Direct and Portfolio Investment

John R. Dilyard


John R. Dilyard INTRODUCTION Among all the forces that have shaped the fortunes of multinational corporations and the history of globalization since the latter half of the 20th century, none has surpassed foreign direct investment (FDI) in its influence and scope. Likewise, no other force has been as scrutinized as FDI; it has been the focal point of international business literature for much of the last forty years. A leading voice in the creation of that literature has been John H. Dunning, whose contributions to current understanding of all aspects of FDI are voluminous. Indeed, it would be difficult to imagine a work on FDI today that did not include at least one reference to Dunning. Dunning’s most significant contributions have come in helping us understand why FDI takes place, where it is made, how it is strategically used by MNCs to improve their global competitiveness, how it affects country competitiveness, how (and why) governments treat it and how it is used by industries in response to changing competitive conditions (Dunning, 1970; 1981a; 1986; 1988b; 1993a). Thanks to Dunning, we have come to know FDI as a mode of entry into a foreign market, the exercise of an advantage held by a MNC over its rivals, and as a transfer mechanism for efficiency, technology and skills across national and firm borders. It is also a means by which economic development can be enhanced through the creation of jobs and the dissemination of skills and a...

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