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Eclectic Paradigm
What does it mean?
A theory that provides a three-tiered framework for a company to follow when determining if it is beneficial to pursue direct foreign investment.
In Other Words...
In order for a direct investment in a foreign country to be beneficial, the following advantages must be present:
1. Product or company specific advantages, such as a comparative advantage.
2. Location specific advantages - where the company derives greater benefit through a foreign establishment.
3. Market internalization - meaning it is better for the company to exploit a foreign opportunity itself, rather than through an agreement with a foreign firm.
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Related Terms
Absolute Advantage | Comparative Advantage | Foreign Direct Investment (FDI) | New Paradigm
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