Dunning’s Electric Paradigm

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This paper reviews the Dunning’s paradigm in the relation of the mode of entry of companies. It also reviews other theories and factors that determine the mode of entry. Prominent among them is Porter’s diamond model. Dunning’s paradigm became popular because it took into account three important factors that determine the mode of entry, namely ownership, location, and internalization. But in the current scenario, this paradigm is not taking into account many factors like changes in technological capability and governmental policies of the host nation. It would be better not to depend on one theory or model when considering a mode of entryThe multinational enterprise of today has got the options to expand even more in the international market as a result of increasing globalization. These companies which are operating in different countries are able to generate profit through their unique policies and strategies and sometimes their profit margins overcome the nation-state. They are able to find new business destination and succeeding to sustain in a particular market. This report will focus on the critical issue of entry into foreign markets of critically examining Dunning’s eclectic paradigm. It will also review to what extent the theory provides a basis for understanding why firms choose one entry mode over another and consider any alternative theories with relation to the mod of entry.According to Xuemin Zhao and Reinhold Decker, Being such an important issue market entry mode choice became the object of numerous theories and models developed to understand and explain associated phenomena. (Zhao and Decker, p.3). The authors have provided several theories that have been developed over the years in relation to the mode of entry by corporations they include the Dunning’s eclectic paradigm.