ABSTRACT
How does OLI apply to OIL? That is the question that this chapter addresses in applying theories of transnational corporations to BP’s experience as a major foreign direct investor in the US. The theoretical elements in the paper come from John Dunning’s ‘eclectic paradigm’, which argues that the impetus for firms to engage in international operations comes from the OLI combination of ownership (O), locational (L), and internalization (I) advantages (Dunning 1977, 2000). Ownership and internalization advantages belong to firms, while locational advantages belong to countries. The ownership advantages of firms, commonly called competitive advantages, stem from their possession of distinctive skills and assets such as superior technology, powerful brands, privileged access to raw materials, or management skills. Internalization advantages are derived from using internal administrative processes to effect transactions within the firm – for example, transfers of intermediate products, or of know-how – more efficiently than can be achieved in imperfect external markets. Locational advantages arise from the comparative endowments of different countries, such as cheap labour, plentiful natural resources, or growing markets.
