Question

In your own words, what is "OLI Theory"? What are its 3 main components?

(1 to 2 paragraphs minimum required)

Answer 1

The OLI stands for Ownership, location and internationalization and the theory applies to identify holistically applying the foreign direct investment is feasible for the company or not. It is also called as “Eclectic paradigm” which gives importance to find out ‘why’, ‘where’ and ‘how’ multi-national enterprises work internationally by having OLI framework. The three components of this are –

• “ownership advantages” which are particular to the nationality of the organization owner and its nature
• “location advantages” appears from the fact that different location can offer different resources, regulations, establishments associated with the production costs and revenues.
• “internalization advantages” which are linked with the allocation of ownership advantages among various national boundaries within own company.