Question

Some countries have oil as a natural resource and bronze plate inc, based in illinois, is considering building a facility in one of those foreign countries since it does not have easy access to oil near its manufacturing plant. Which theory of foreign direct investment provides an explanation for this decision?

A) eclectic paradigm
B) infant industry argument
C) protectionism argument
D) product life cycle theory
E) new trade theory

Answer 1

Answer: A) eclectic paradigm

Step-by-step explanation:

An Eclectic Paradigm is also called a OLI Framework which is an acronym that stands for Ownership, Location, Internationalization.

Companies use this theory in cost based analysis to determine if they can reduce costs by producing in house as opposed to from the market.

It is usually applied to the area of Foreign Direct Investment where companies use it to decide if it is better to invest in another country and have easier access to goods that it needs as opposed to buying it from the market. If it is shown that they stand to gain more from investing directly in another country, they will use this option.

This is the theory that Bronze Plate Inc wants to use.