Provide a 10 pages analysis while answering the following question: Institutions and the OLI Paradigm of the Multinational Enterprise. Prepare this assignment according to the guidelines found in the

Provide a 10 pages analysis while answering the following question: Institutions and the OLI Paradigm of the Multinational Enterprise. Prepare this assignment according to the guidelines found in the APA Style Guide. An abstract is required. The Dunnings OLI model also known as the electrical model was developed by professor Dunning. The theory is essentially a mix of three elements, namely ownership, location, and internationalization. The three elements of the theory were explained as advantages by Dunnings. The model was developed by him with the object of identifying the main factors which motivate a firm to expand internationally. Dunnings was of the opinion that existing theories of international expansion are partial and tries to develop a concrete theory by bringing in the various aspect of existing theories together.

The ownership advantage as explained by Dunnings is key aspects behind the existence of MNE’s. The ownership advantages are firm specific. When large organizations invest in a foreign nation, they are bound to have certain costs. These costs may be related to increases in production expenses, setting up of manufacturing units, procurement of resources and other factors. In order to overcome such costs, the firm is required to get compensated in some other form. This can be by gaining increased revenue or procuring enhanced retained earnings and so on. The ownership costs play an important role for MNE’s to invest in a foreign nation for productions. If the cost of ownership is low, FDI can be easily made. However, the market and industry feasibility must be well analyzed before making such an investment. Alternatively, if the ownership costs are high, firms should forecast and determine if making such an investment would be profitable for the long run or not. The ownership costs under such a case need to be compensated with adequate levels of returns. Usually, ownership benefits in a foreign country arise out of aspects such as property or other firm-specific advantages. Ownership advantages are seen to develop out of monopoly as well, such as privileged or singular access to certain resources or patents. Most MNE’s which seek to invest in a new foreign market prefer to initially understand and assess the different forms of ownership advantages which can be procured.

Many at times, such ownership benefits gained from a foreign nation facilitates the firm’s aids in improving operations at the firm’s parent base in a different nation. For instance, a number of firms invest in China so as to procure ownership advantages of low-cost superior technology. Such technological benefits may also be transferred to the firm's other operational units located in diverse nations. The ownership advantages may also occur in a reverse form, such as different strengths of a firm which can be exploited abroad. Such as a firm which possesses patent rights regarding the production of a certain product may find more demand in a foreign market than its own parent nation. Hence, already existing firm advantages may facilitate a company to function more successfully in a foreign market.