Appendices

Appendix A: The Eclectic Paradigm of International Production

1.     Ownership-Specific Advantages (of enterprises of one nationality (or affiliates of same) over those of others)

a.  Property rights and/or intangible asset advantages

Product innovations, production management, organizational and marketing systems, innovatory capacity; no-codifiable knowledge; ‘bank’ of human capital experience; marketing, finance, know-how, etc.

b.  Advantages of common governance

i.  Which those branch plants of established enterprises may enjoy over de novo firms.  Those due  mainly to size and established position of enterprise, e.g. economies of scope and spezialisation; monopoly power, better resources capacity and usage.  Exclusive or favoured access to inputs, e.g. labour, natural resources, finance, information.  Ability to obtain inputs on favoured terms (due to e.g. to size or monopsonic influence).  Exclusive or favoured access to product markets.  Access to resources of parent company at marginal cost.  Economies of joint supply (not only in production, but in purchasing, marketing, finance, etc., arrangements).

ii. Which specifically arise because of multinationality.  Multinationality enhances above advantages of offering wider opportunities.  More favoured access to and/or better knowledge about international markets., e.g. for information, finance labour, etc.  Ability to take advantage of geographic differences in factor endowments, markets.  Ability to diversity or reduce risks, e.g. in different currency areas, and/or political scenarios.

2.       Internalization-Incentive Advantages (i.e. to protect against or exploit market failure)

Avoidance of search and negotiating costs.

To avoid costs of enforcing property rights.

Buyer uncertainty (about nature and value of inputs (e.g. technology) being sold)

Where market does not permit price discrimination.

Need of seller to protect quality of intermediate of final products.

To capture economies of interdependent activities (see b. above)

To compensate for absence of future markets.

To avoid or exploit government intervention (e.g. quotas, tariffs, price controls, tax differences, etc.)

To control supplies and conditions of sale of inputs (including technology).

To control market outlets (including those which might be used by competitors).

To be able to engage in practices, e.g. cross-subsidization, predatory pricing, leads and lags, transfer pricing, as a competitive (or anti-competitive) strategy.

3.       Location-Specific Variables (These may favour home or host countries)

Spatial distribution of natural and created resource endowments and markets.

Input prices, quality and productivity, e.g. labour, energy, materials, components, semi-finished goods.

International transport and communication costs.

Investment incentives and disincentives (including performance requirements, etc.)

Artificial barriers (e.g. import controls) to trade in goods.

Infrastructure provisions (commercial, legal, educational, transport and communications)

Psychic distance (language, cultural, business, customs, etc. differences).

Economies of centralization of R & D production and marketing.

Economic systems and policies of government; the institutional framework for resources allocation.

(Source: Dunning, John H., Explaining International Production, Unwin Hyman Ltd, London, 1988, p.27.)

Appendix B: Uppsala Model Tested on Belgian Enterprises

Preliminary stages to the establishment of a production subsidiary abroad by Belgian multinational enterprises.

¹ Number of cases.

Source: Haex and Van Den Bulcke (1979, p. 63-65)

            Based on Newbould, Buckley and Thurlwell (1978)

Appendix C: Types of Foreign Production

1. Kind of activity today in China

2. Incentives to internationalize towards China

Appendix D: The Eclectic Model Applied

In table below is indicated how the observed enterprise are positioned in which kind of market.