Eclectic Paradigm
A theory that provides a three-tiered framework for a company to follow when determining if it is beneficial to pursue direct foreign investment. Investopedia Says:
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. Related Terms:
Absolute Advantage
Comparative Advantage
Foreign Direct Investment (FDI)
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