Which of the following theories states that firms undertake foreign direct investment,when the features of a particular location combine with ownership and internalization advantages,to make the location appealing for investment?
A) market power theory
B) international product life cycle theory
C) market imperfections theory
D) eclectic theory

Question

Quizplus · Accepted Answer

The eclectic theory, also known as the OLI framework or ownership-location-internalization framework, states that foreign direct investment takes place when three conditions are met: ownership advantages, location advantages, and internalization advantages. The location advantage refers to the combination of factors that make a particular location attractive for investment, such as natural resources, labor markets, infrastructure, or government policies. In summary, the eclectic theory explains why firms choose to invest abroad based on the specific advantages they possess and the characteristics of the location they are targeting. The market power theory emphasizes the strategic behavior of firms seeking to gain market power through FDI. The international product life cycle theory explains the patterns of trade and investment over time based on the stages of a product's life cycle. The market imperfections theory argues that FDI arises from market failures such as imperfect competition, incomplete information, or transaction costs.

Which of the Following Theories States That Firms Undertake Foreign