Discuss Location-Specific Advantages and Provide an Example of This Advantage

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The Answer is The eclectic paradigm was championed by the British economist John Dunning. Dunning argued that location-specific advantages were also of considerable importance in explaining both the rationale for and the direction of foreign direct investment. By location specific advantages, Dunning meant the advantages that arise from utilizing resource endowments or assets that are tied to a particular foreign location and that a firm finds valuable to combine with its own unique assets (such as the firm's technological, marketing, or management capabilities). Dunning accepted the argument of internalization theory that it is difficult for a firm to license its own unique capabilities and know-how. Therefore, he argued that combining location-specific assets or resource endowments with the firm's own unique capabilities often requires foreign direct investment. That is, it requires the firm to establish production facilities where those foreign assets or resource endowments are located. An obvious example of Dunning's arguments are natural resources, such as oil and other minerals, which are-by their character-specific to certain locations. Dunning suggested that to exploit such foreign resources, a firm must undertake FDI.

Discuss Location-Specific Advantages and Provide an Example of This Advantage

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