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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 4: The Eclectic Theory in Latin America

Robert Grosse


Robert Grosse1 Dunning’s eclectic theory is essentially a ‘kitchen sink’ theory. That is, it includes everything that could explain (economic) aspects of international firms, including the kitchen sink. The theory does not give any hint as to priorities among factors in explaining international business activity, nor does it offer a dynamic perspective, except as it has been extended by various authors (e.g. Agarwal and Ramaswami, 1992; Banerji and Sambharya, 1996). In brief, the eclectic theory is too eclectic to be a compelling theory – yet it is persistent in its appearance in the literature, and it is long-lasting relative to other theories of the multinational firm – and it offers a wide range of strategy and policy guidelines that remain valuable today. Why is this so? Despite various efforts to debunk the theory (e.g. Itaki, 1991), and alternatives that are more elegant (such as the internalization theory (Buckley and Casson, 1976; Rugman, 1980) and the theory of competitive advantage (Porter, 1985), not to speak of extensions of Ricardo’s comparative advantage theory (Ricardo, 1817; Ohlin, 1933; Jones, 1956) the eclectic theory has held up remarkably well. Apparently there is something fundamentally useful about this conceptual structure. Perhaps this can be seen most readily in an empirical context. As one broad example, consider international business in Latin America. In this context it is clear that the eclectic theory offers a very useful perspective on foreign direct investment patterns during the second half of the 20th century. This statement should be...

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