ABSTRACT
This chapter presents a wealth of literature on foreign direct investment (FDI), both theories, empirical studies, and corporate geography, to uncover the locational mechanisms of FDI. It discusses theories on FDI and reviews corporate geography’s contributions. The chapter reviews the empirical analysis on the location of FDI. A comprehensive locational framework for the location of FDI seems lacking. Product cycle theory distinguishes itself from other theories in two aspects: its dynamic nature and its explicit locational dimension. The locational advantages of both home and host nation also must be present to allow international production to occur. The basic hypothesis of the eclectic paradigm is that international production only occurs when there is a juxtaposition of three types of advantages related to a specific firm: ownership-specific advantages, location-specific advantages, and market internalization advantages. Market imperfections can be caused by both goods and factor markets, scale economies, and government imposed regulations that prevent the efficient allocation of resources and distribution of products.
