Final answer:
The paradigm in question relates to how companies consider various location-specific factors for foreign direct investment, rather than focusing solely on weaker environmental regulations and associated cost savings.
Step-by-step explanation:
The paradigm referred to is based on the way location affects the direction of a company's foreign direct investment (FDI). Firms looking to set up new factories or expand their operations internationally consider multiple factors such as labor and capital costs, proximity to customers and suppliers, the quality of transportation and communication networks, the prevalence of reliable electrical power, tax levels, and the local government's competence and integrity.
Environmental costs do play a role, but they are often minimal in comparison to other financial considerations, generally accounting for just 1 to 2% of the total costs faced by large industrial companies. Factors influential to FDI often outweigh the benefits of lower environmental regulation costs in poorer countries, debunking the 'race-to-the-bottom' scenario where companies relocate solely for weaker environmental rules.
The decision-making process around FDI tends to be comprehensive and strategic, with a long-term focus, significantly more involved than making portfolio investments which can be quickly altered with simple transactions. In sum, while environmental regulations are a consideration, they are typically overshadowed by other cost factors and strategic business considerations in determining the best location for investment.