Internationalization Theories Essay Example | Topics and Well Written Essays - 3000 words

Internationalization Theories - Essay Example Due to the generality of the OLI, the theory has been limited to the task of explaining particular types of foreign behaviors or production of specific enterprises, unless there is an application of the framework to a specific predefined context. As opposed to other theories, OLI is specific to particular contexts of application, especially in its configuration that is likely to differ in different regions, firms, countries, industries, or in the value-added practices. On the other hand, the OLI application is most likely to rely on Foreign Direct Investment (FDI) motivators (Demos, Fragkiskos and Marina, 2004). The primary assumption of the OLI is that the FDI returns, and thus the entirety of FDI, may be explained using three factors. They include: the firm’s ownership advantage ‘O’, which indicates who produces abroad, as well as other types of international activities; internationalization advantage ‘I’; and the location advantage (L), which gives reasons for   firms   to take part in FDI as opposed to licensing the foreign companies to make use of their proprietary assets (Adner and Kapoor, 2010).For the firm to effectively compete within a foreign location, it must have particular ownership advantages, which are also referred to as monopolistic or competitive advantages, which compensate for the extra costs incurred during the setting up of its operations in the foreign country, which are not faced by the producers from within the country (Desbordes, 2007).