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Dunning’s Eclectic Paradigm

Dunning’s Eclectic Paradigm Professor John Dunning proposed the eclectic paradigm as a framework for determining the extent and pattern of the value-chain operations that companies own abroad. Dunning draws from various theoretical perspectives, including the comparative advantage and the factor proportions, monopolistic advantage, and internalization advantage theories. Let’s use a real firm to illustrate the eclectic paradigm. The Aluminum Corporation of America (Alcoa) has over 130,000 employees in roughly 43 countries. The company’s integrated operations include bauxite mining and aluminum refining. Its products include primary aluminum (which it refines from bauxite), automotive components, and sheet aluminum for beverage cans and Reynolds Wrap®. The eclectic paradigm specifies three conditions that determine whether or not a company will internationalize via FDI: ownership-specific…