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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 7: Institutions, Exclusivity and Foreign Investment

Sarianna M. Lundan


Sarianna M. Lundan INTRODUCTION In this chapter we revisit the issue of investment attraction and retention from the perspective of a region wishing to attract foreign investment. Conceptualizing the MNE as a learning or knowledge network, as has been done in many contributions recently, allows us to refine the discussion of investment attraction, and in particular the issue of investment retention. We argue that the ‘learning subsidiary’ wants to belong, both to the internal MNE network, as well as to the institutional network of its host region, and that investment retention is conditional on the extent to which the MNE can appropriate the economic payoff from its insider status in the long run. A large part of the international business literature to date has not been primarily concerned with the location-bound component, but rather with the issue of mobility. In the 1970s and 1980s the focus was on the development of theories of foreign direct investment as well as the firm’s process of internationalization, with the so-called Uppsala or behavioral school focusing on the resources and limitations that allow for initial internationalization, while others considered the managerial issues related to the mode of entry. Along with the maturation of the investments made in the 1970s and 1980s, attention has shifted from the processes of expansion of the firm more toward the exploitation and further integration of the extant investments of the multinationals. In their highly influential work Bartlett and Ghoshal (1989) were among the first to discuss the...

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