The ________ theory states that firms undertake foreign direct investment when the features of a particular location combine with ownership and internalization advantages to make a location appealing for an investment.

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The eclectic theory, also known as the OLI framework, argues that three types of advantages (ownership, location, and internalization) must be present for a firm to undertake foreign direct investment. The theory suggests that ownership advantages are possessed by firms that have superior technology, managerial skills, and other intangible assets that give them a competitive advantage in the global marketplace. The location advantage refers to factors such as market size, natural resources, labor costs, and political stability that make a particular location attractive for investment. Internalization advantages are those that arise when a firm chooses to internalize its operations rather than rely on markets or suppliers for certain inputs or outputs. According to the eclectic theory, foreign direct investment occurs when the combination of ownership, location, and internalization advantages is greater than the cost of doing business in a foreign market.

The ________ Theory States That Firms Undertake Foreign Direct Investment