While Dunning's OLI model provides a general paradigm for Essay

While Dunning's OLI model provides a general paradigm for expelling the determinants of FDI, its use in designing an international corporate strategy is limited and requires more models for the task - Essay Example meanwhile, Douma and Schreuder (2012) noted that as far foreign direct investment (FDI) is the approach to internationalisation a company seeks, the eclectic paradigm, also known as the OLI (ownership, location, internalisation) model developed by John Dunning is one important framework that provides general paradigm for knowing the determinants of the FDI. In this paper, the strengths of the OLI model to the study of FDI are appreciated whiles examining the limitations of the model in designing an international corporate strategy for firms. By extension, the paper takes a stance that it is one thing to be engaged in internationalisation and another to have an international corporate strategy. This is because the latter is wider and covers several aspects of corporate growth and expansion management than the former (Li, Ferreira & Serra, 2009). There are several ways that the OLI model helps in influencing the study of FDI. On the whole, the model helps firms to make decision on becoming multinational by understanding the potential sources of advantages they have that could make them successful. The model is important in providing firms with an understanding of their ownership advantages, where the question of firm-specific qualities of the firm is addressed (Antras & Elhanan, 2004). Because the firm-specific advantages are tied around the company’s unique approach to doing business, it helps firms to identify their competitive advantage which allows them to overcome the cost of operating in international markets (Peng, 2001). Without applying the OLI model and for that matter ownership advantage therefore, it becomes difficult for firms to identify their competitive advantage with which they will become preferred options for consumers instead of their competitors. Secondly, the OLI model is relevant in helping firms identify location advantages, where the firms answer questions on the best places to choose for internationalisation (Neary, 2007). In