Dunning's Eclectic Paradigm Essay

Dunning’s Eclectic Paradigm

The eclectic (otherwise known as OLI) paradigm has been a dominant framework for the elements of FDI as well as the foreign activities of MNEs. The framework avers that the extent, industrial and geography structure of overseas production taken by MNEs is determined by three factors, namely (O) Ownership, (L) Location and (I) Internationalisation (Dunning, 2000). Firstly, ownership advantage is established by firm-specific ownership of intangible assets. Assets such as technological knowledge, marketing knowledge and even its managerial capabilities to control and manage international transactions. Secondly, location advantage is characterized by comparative cost of country-specific inputs (natural resources, materials

In terms of investment, product and technology development and marketing, Samsung has contributed in expanding the frontier of Korea’s electronics industry (Yu, 1998). In 2005, Samsung Electronics (subsidiary of Samsung Group) became the largest conglomerate (chaebol) in Korea and its net sales reached $140.9 billion in 2005 and a net income of $9.4 billion. Having their headquarters in Seoul itself, the group has 337 offices and facilities in 58 countries. Samsung also employed over 220,000 people worldwide. It has 14 listed companies in the group as well as three core business sectors, namely electronics, finance along with trade and services (Lee and Slater,

By the mid 1980s, Samsung Electronics was building their first large manufacturing facility. With the objective to develop its first frontier technology, Samsung Electronics set up two factor forces in America and in Korea, by employing Korean-American Ph.Ds. mastering the field of electronic engineering. Samsung makes massive investments in plants and technologies, which leverages its situation into a position that other companies may find it hard to compete. Samsung successfully in developing its 64K DRAM, but at the point of time, the DRAM market was saturated. Even though Samsung Electronics suffered, it kept investing in R&D and facilities as well as establishing joint ventures in many countries overseas (Lee and Slater, 2007). Samsung technological learning at the early stage presents that the company was engrossed in generating new technology by using its dynamic capabilities. The capabilities and resources that are accessible at the point of time they advanced into semiconductor production resulted from their personal experiences of assembling the semiconductors that were imported from the developed countries. Samsung did not have the resources to design or to construct the facility to produce them. Nonetheless, Samsung improved and developed its own technological capabilities as well as using its capabilities to create new