Research Summary

Abstract:

The Eclectic Paradigm, or OLI framework, remains a cornerstone of international business theory, providing a comprehensive explanation for why firms engage in foreign direct investment (FDI). This article reviews the evolution of the paradigm, focusing on its three fundamental pillars: Ownership (O), Location (L), and Internalization (I) advantages. Ownership advantages refer to the firm-specific assets that allow a company to compete abroad, while Location advantages focus on the specific benefits offered by the host country. Internalization advantages explain why a firm prefers to maintain control over its activities rather than licensing them to third parties. The study traces the historical development of the OLI framework and its adaptation to the shifting dynamics of global markets, including the rise of digital multinational enterprises and the influence of emerging economies. The author discusses the paradigm's ability to explain foreign market entry modes and the strategic choices of multinational firms. Furthermore, the research addresses the gaps in traditional OLI theory, suggesting a move toward a more holistic understanding that integrates institutional and resource-based views. The article emphasizes that despite various criticisms, the Eclectic Paradigm retains high explanatory power for contemporary FDI trends. Ultimately, the study serves as a critical review for researchers seeking to apply the OLI framework to modern challenges in international business and global investment strategies.