The decision of choosing the market entry strategies is a very important decision to any firm, since it influences the firm in the conditions of international success, and will determine to a sizable extent the near future performance of the firm in the internationalization process.
The choice of the marketplace entry strategy is definitely an interesting topic for researchers to discuss, and the problem of choosing the entry mode is always taking place in the papers and articles that discuss the internationalization process. Consequently, a lot of theories that discuss and analyze the problem of choosing the market entry started to happen in the marketing literature to study the strengths and weaknesses of market entry modes, and to cover the gaps and issues of the market entry choice.
The fact that not all the theories succeeded to protect the weaknesses of the marketplace entry choice, in once, even the theories that succeeded to discuss this issue weren't in a position to cover the entire issue. In other words, it's preferred to work with several theory to attain the integration in discussing the decision of market entry issue, also to be able to analyze it from all possible dimensions.
In this project we decided to discuss the marketplace entries from a theoretical and methodological perspective by analyzing the eclectic theory of Dunning( 1977, 1979, 1988, 2000) with the try to solve a genuine international problem in this 1st Semester Project through the use of the research on the study case of Jarlsberg brand, who entered the market of USA and we seek to describe this decision with their market entry form, from a theoretical-methodological perspective. Further down it will be discussed in a variety of ways that it might be understood, analyzed and solved.
We are expecting that using the eclectic theory will help us understand and analyze the market entry choice from a broader perspective; however, we'll try to discover if the eclectic theory is the integrated theory of explaining the marketplace entry choice by studying and analyzing it in the paradigm of Burell & Morgan (1979) with 4 forms of assumptions (ontological, epistemological, methodological and human nature assumptions).
Jarlsberg is a Norwegian cheese company that belongs to TINE SA which is one of the big producers, distributors and exporters of milk products in Norway. Jarlsberg has been developed in the 1950's. It was based on traditions from Swiss cheese makers who developed cheese with holes in the 1830's. Jarlsberg cheese arrived to the United States in 1963. Its management did a lot of work to demonstrate how the cheese could be utilized for daily meals and parties. It's been well received in america market and within 50 years after entering the US market it is just about the imported cheese with the biggest market share of its category in the US supermarkets.
As for the US cheese market, the total US market for hard cheese is approximately 400, 000 tons, but the market consumes a lot of soft cheese as well. Though Jarlsberg only a little market share in the full total hard cheese market (in 2008 Jarlsberg sold 12, 600 tons to the US market) this represents the largest market share in the Swiss like cheese category. In 2008 the full total export of Norwegian cheese to the United States was approximately 8000 a great deal of which the majority was Jarslberg.
Jarlsberg faced some problems to increase its sales in the US market due to following quota that your WTO has set up between Norway and the US. This quota states that Jarlsberg can only sell a restricted amount of cheese from Norway to the united states. To increase sales, a licensed production was setup in Ohio in 2000 with an total annual production of around 5, 000 tons.
TINE founded Norseland Inc. a wholly owned subsidiary in 1978 for the intended purpose of marketing and distributing Jarlsberg in america market.
The market entry in the internationalization process is a very interesting and important topic that attracts the interest of researchers to go over and make an effort to understand it more. We found that choosing this topic can help us gain more understanding of market entries, and a broader view based on a theoretical perspective. Specially that the marketplace entry is known as a major problem because of its complexity and because of the variety of factors and determinants that organizations take in consideration during new market entry.
We chose Jarlsberg to be our case study so we can apply the used theory to understand the depth of market entry as a difficulty. Our research question is:
The selection of market entry strategies is known as the main stage in the internationalisation process in the literature of international marketing and management in line with the Czincota R(2011). This determines the organizational structure, as well as the height of the chance engaged along the way, along with the size of the resources invested in the foreign country.
Many theories make an effort to explain the best way enterprises internationalise. Unfortunately, there is absolutely no super theory whatever can provide comprehensive understanding of why companies choose to internationalize.
Therefore, we considered that in the internationalisation process, selecting market entry strategies is a challenge for every firm; the theory that can provide us a general overview and a knowledge to the problem concerning this challenging decision is the eclectic paradigm (Duninng 2000). The reason why of selecting this theory is the fact explains in the terms of internationalization the best of selecting market entry and combines financial theories on international trade and neo-institutional theory on market imperfection to be able to build up and 'eclectic' framework for understanding.
Chapter 1: Introduction2. 3 Structure of the project
Chapter 2: Problem Definition
Choice of Theories
Chapter 3: Methodology
Burell & Morgan
Abnor & Bjerke
Selected Paradigm Framework
Chapter 4: Theory
The Eclectic Theory (OLI)
Chapter 5: Analysis of the meta-theoretical level
Chapter 6: Discussion & Conclusion
Chapter 7: Reflections
In order to solve the situation formulation, this project undergoes 7 chapters (see project structure). Chapter 1 is a briefly introduction about the research background. Chapter 2 mainly targets the presenting of problem formulation. Thereafter, problem formulation and one research questions are put forward. Chapter 3 is the methodology chapter. To make our research strategy more convincing, we commit ourselves to build up strong arguments and justifications for selecting methodological approach. Two commonly accepted paradigmatic assumptions frames, i. e. Abnor&Bjerke as well as Burrell&Morgan, are brought in to the discussion, by which one can get a comprehensive understanding on the amount of contrast and level of similarity in both frames. Thereafter, we get the best option that guides us to determine our own research strategy. Chapter 4 illustrates a brief review about the theory we choose to answer the best the research question and theory's underlying assumptions. Chapter 5 deals with the analysis at a meta-theoretical level, where the theory is analyzed in conditions of ontological, epistemological and human nature. The conclusion and discussion is made in chapter 6 where we submit ourselves and offer our research understanding, where we comprehended the theoretical knowledge and the analysis will be narrow to the ultimate conclusion. Chapter 7 provides a further and deeper knowledge of our research study from both theoretical and practical perspectives, where we will discuss the problems such as if the applied theories in this research fit our realities, a target evaluation/critique on the defects of the applied theories, as well as the likelihood of revision on our previous framework.
The following chapter will contain discussion and description of different methodology models and the assumptions which determine this project. There are numerous theoretical methods to methodology and we'll focus on two commonly accepted, respectively G. Burell & G. Morgan's (Burell&Morgan) and Abnor & Bjerke's (Abnor&Bjerke). It starts with explanations of the idea of paradigm and followed by elaborations of the terminologies in both Burell&Morgan and Abnor&Bjerke's approaches. Thereafter, the different approaches for creating knowledge in both works and comparison of Abnor&Bjerke with Burell&Morgan's method of methodology will be discussed. The decision of systems approach from Abnor&Bjerke's framework to be utilized in this project will be the conclusion of the section.
The reasons for the uses of paradigms in research carry the reliability for the readers into which foundation of belief the research is done, so that the gap between your researcher and the research results becomes smaller. If two researchers did the same kind of research and achieved similar results, the interpretation of the could be different because of their individually different ways of viewing the entire world. By explicitly stating the paradigmatic view of the study and how the researcher approaches the problem of research, it is simpler for folks to reject or approve the study. The premise upon which the research is built is because of this important. To get started with, we have to know what paradigm identifies and ensure that we share the same thoughts and opinions towards it. Within this is of paradigm will be presented. Many scholars have discussed the concept of paradigm, that was firstly defined as "cluster of beliefs, which guides researchers to decide what should be studied and how results should be interpreted" by Thomas Kuhn (Kuhn, 1962, p. 10). As a scientist of natural science, he claims that the old paradigm will be replaced by the new paradigm when the "revolution" happens whose research area is social and economical science, posits that the knowledge accumulates over a period of time and the forming of new paradigm is based on the old paradigm, they do not exclude the new one. Moreover, the old paradigm usually survives even though the new paradigm is created (Abnor & Bjerke, 1997, pp. 12-13). G. Ritzer defines a paradigm as "the basic conceptions of any science of what its subject is. Upon this basis it is defined, what's to be studied, which questions should be raised, that they shall be raised and which rules shall be observed when interpreting the obtained answers. The paradigm is the most comprehensive unit about which there exists agreement within the sciencebranch and which serves to split up a scientific community (or sub-community) from another. It arranges, defines and connects the examples, theories, methods and instruments of a given science. " Therefore, a paradigm is more a couple of rules, that could help scientists conduct researches within the examples, theories, methods and instruments.
Every kind of research is seen as a a common knowledge of what is being studied, the questions that needs to be asked, how researchers should structure their approach, and how the results should be interpreted. Kuada also argues that science is developed in overlapping waves, which create new ideas and could alter the perception of what is regarded as facts. There is normally consensus among scholars that a paradigm is defined in terms of four different kinds of assumptions: ontological, epistemological, methodological assumptions, and assumptions about human nature (Kuada 2011).
Burell&Morgan (1979) define a paradigm in the types of four assumptions that are ontological, epistemological, methodological, and assumptions on human natures. They understand social science mainly from three levels. To begin with, they view the paradigm as alternative realities which is the fundamental step to understand social science. Schools of thoughts are developed predicated on the reality one observes. And then individuals who have different school of thoughts use different tools and methods to solve the specific problems.
Abnor&Bjerke define a paradigm as "any group of general and ultimate ideas of the constitution of reality, the structure of science, scientific ideals and has an ethical/aesthetical aspect" (Abnor& Bjerke, 1997, p. 14). Quite similar to Burell&Morgan's (1979) three levels knowledge of social science, Abnor&Bjerke likewise have their terminologies. Abnor&Bjerke define methodological approach where Burell&Morgan use the term schools of thought.
The operative paradigm can be used in Abnor&Bjerke where Burell&Morgan view is as a puzzle solving areas.
Ontology describes the type of the research object. It concerns whether reality is external to the individual or if the individual creates his own social world (Objective and subjective dimensions).
Epistemology describes the type of knowledge. It deals with the question if the researcher can know the truth about an external world or if he needs to participate that world to be able to understand it.
Methodology describes the way knowledge is acquired and can thus be characterized as an idea for the study. When you are conscious about the circumstances where the research is done as well as the choice of methodology, the researcher may be able to get more valid results and become recognized by other scholars in the field.
Human nature describes the researcher's view of the relationships between humans and their environment. It considers if the researcher sees the social environment as something external to the observer or if he is part of the social world.
Figure The subjective - objective dimension
Created from J. Kuada (2011)
Realism means that the social world is real and external to the observer and his cognition. On the contrary, nominalism assumes that reality is constructed by individuals and their interaction.
Positivism often looks at causalities and regularities: the researcher can investigate the social world as an external observer. On the other hand, anti-positivism assumes that the social world can only be investigated from the perspective of people mixed up in research matter.
Determinism is dependant on the assumption that folks are dependant on their environment whereas voluntarism supports the notion that folks can act according to their free will.
The nomothetic approach usually uses quantitative survey methods: the approach to data collection and analysis is structured. For the idiographic approach symbols and ideas are predominant and it is typically related to anthropological approach: the researcher will typically use qualitative methods (Burrel & Morgan 1979).
In social science, different typologies of paradigms had appeared due to objective-subjective debate. We will briefly present two typologies of paradigms with the roots in classical sociological studies (Kuada, 2011).
RRIF classification is the short form from that cover Radical humanism, Radical structuralism, Interpretivism and Functionalism. All of this four paradigms creates the framework by Burell&Morgan. They make a distinction between objectivity and subjectivity. All of these paradigms are apprehensive with the social order and the nature of changes in society found in critical research studies.
Abnor & Bjerke's classification describe the six paradigms and three methodological approaches
The terminologies from B&M and A&B will be described respectively in the next section, thereafter the comparison of both will be provided.
Burrell and Morgan's assumptions about the social science are gathered in a subjective-objective dimension (see Fig. 2) while assumptions about the type of society are assembled another dimension comprising sociology of regulation and sociology of radical change (see Fig. 3)
Burell&Morgan have a straightforward approach towards social science, namely, either subjective or objective. Their paradigmatic assumptions are also developed in two directions that are shown as the aforementioned figure.
Ontology: ontology has its roots in philosophy which is described as the study of the type of being existence or reality. In social science, ontology is dealing with the conception of reality; whatever reality is independent from humans or it is a product of the human mind. "The ontological debate" of Burrell and Morgan is between nominalism (subjective view) and realism (objective view).
The nominalist will not recognize a"real structure"of the world: "the social world external to individual cognition is made up of nothing more than names, concepts and labels which are being used to structure reality" (Burrell and Morgan 1979, 4).
The realist, contrary to the nominalist, "postulates that the social world external to individual cognition is a genuine world made up of hard, tangible and relatively immutable structures" (Burrell and Morgan 1979). For the realist, the social world exists and has always existed in itself, not created by human beings, which is independent of human beings who cannot influence it.
Epistemology: Epistemology is the study of the type and scope of knowledge in philosophy. While in social science, epistemological discussion copes with any knowledge that can be obtained throughout observation or to be experienced. Burrell and Morgan draw on their paradigmatic assumptions by identifying anti-positivism and positivism as dualistic characterization of the "epistemological debate" (see Fig. 1). The anti-positivists reject observation as way of gathering knowledge. In order to "understand" people have to "participate".
For the positivists, the original approaches which dominate the natural science ("verificationists" and "falsificationists") will be the background for thinking that knowledge is a cumulative process. The positivists are keen to explain by looking for patterns to be verified and hypothesis to be falsified.
Human nature: The "human nature" assumption debate in Burell&Morgan's paradigms is between voluntarism and determinism (see Fig. 4), between human beings as creators with their environment and human beings as determined by the environment. The two extreme terms reflect the relationship between man and society. The voluntarist is independent and has free will as the determinist's actions be based upon what is happening around him. From human nature perspective it could be mentioned that Western companies would fit into the deterministic assumption.
Methodology: According to Burrell&Morgan, researchers can understand the social world having an ideographic or nomothetic approach (see Fig. 1) to the area of study. The ideographic approach is dependant on the belief that researchers can get to new knowledge through the analysis of the subjective which can only be achieved through the procedure for investigation by "getting inside" situations. The nomothetic approach is seen as a the target view of reality. Knowledge can be created by "systematic protocol and technique by testing hypothesis in accordance with the cannons of scientific rigor" (Burrell & Morgan, 1979, p. 6).
In the sociology of regulation researchers are worried with explaining and understanding society as a unity and its cohesiveness. On the contrary, the sociology of radical change can be involved with conflicts, domination and contradiction in the figure below. Radical change is seen as a visions and utopian ideas worried about what "is possible" rather than what actually "is".
Figure The regulation-radical change dimension
Adapted from Burell&Morgan (1979)
In spite of criticism, Burrell & Morgan in Social paradigms and organizational analysis have really advanced the field of social sciences. Burrell and Morgan give attention to two main issues to group theories: the first one is based on assumptions about the type of social sciences and the next one is based on assumptions about the type of societies. They have developed a matrix with four paradigms as outcome of the assumptions in the subjectivist-objectivist dimension and the regulation-radical change dimension by analyzing the partnership between your two (see Fig. 3).
Figure Radical change vs. Regulation
http://www. emeraldinsight. com/content_images/fig/1190100501002. png
Radical Humanist (Change-Subjective)
Theorists in the radical humanist paradigm are worried with releasing social constraints that limit human potential. They see society as anti-human and try to find ways that social opportunities and ideologies are controlled by large social institutions, often leaving people marginalized, voiceless and disempowered, leading to widespread alienation and the breakdown of communities. Interventions are targeted at concrete individuals and groups, establishing mutual-aid and consciousness-raising networks that will lead to eventual changes in social and financial structures.
The functionalist paradigm represents the perspective rooted in the sociology of regulation, seen from a target viewpoint. Functionalist theorists are worried with explaining the status quo, social order, consensus, social integration, solidarity, need satisfaction and actuality from a standpoint seen as a realism, positivism, determinism and nomothetic. This perspective is highly pragmatic oriented because of the researcher's desire of rational explanation. Functionalists are looking to create knowledge that can be used by providing practical answers to practical problems.
Radical Structuralist (Change-Objective)
Fundamental underlying contradictions and regularities make just how of living unjust and untenable. Distressed individuals and groups can be helped to soothe the impact of structural problems, but lasting change can only just be achieved by the complete transformation of the society. Intervention must be integrated across political, regional, community and interpersonal levels.
The Interpretive paradigm represents the perspective rooted in the sociology of regulation, seen from a subjective point of view. Interpretive theorists are worried with understanding the fundamentals of the social world in a subjective way by seeking explanations by means of individual consciousness and subjectivity. The interpretive seeks to participate, not to observe.
As it is mentioned previously, Abnor&Bjerke make their assumptions from philosophical perspective and can be classified into conception of reality, conception of science, scientific ideals and ethics/aesthetics. They have developed six paradigms predicated on those assumptions that happen to be shown in (Fig. 3). Unlike Burell&Morgan who clarify directly the bottom of these assumptions, Abnor&Bjerke are usually more intuitive, giving space for different interpretations.
Conception of reality, just as as ontology handles the way the truth is constructed. At the same time it also identifies the human nature in Burell&Morgan's paradigmatic assumption view. More precisely, conception of reality involves as well the human interaction with the environment: does reality exist in itself or can humans influence it?
Conception of science has to do with how knowledge gained through education is reflected in the concepts and beliefs a researcher/investigator have. The conception of science assumption is in some ways much like epistemology and human nature in Burell&Morgan's assumptions.
Scientific ideals make reference to personal desires of the researcher/investigator regarding to his/her studies. Burell&Morgan discuss epistemology and methodology assumptions which can be seen as corresponding to scientific ideals in Abnor&Bjerke's assumptions.
Ethical/aesthetical aspects are assuming if requests created by researcher through the investigation process are moral or not.
Abnor & Bjerke have defined six paradigms and three methodological views that overlap one another. They depict paradigms as a continuum (similar to Morgan and Smircich) between subjectivity (far right) and objectivity (far left). The paradigms describe different perspectives on reality, quite simply the ontological assumptions. Departing from the paradigms they have got identified three methodological approaches, which are the analytical, the systems, and the actors approach.
The analytical approach is dependant on beliefs that the only true knowledge is science knowledge. This means that the basics of the approach are the facts empirically verifiable. The truth is objective, and objective reality exists independently, without any influences from anyone's consciousness. The data creator observes the truth as several components, and the total sum of the parts is add up to the whole. Last but not least, the analytical approach means: to divide reality in to the smallest parts, change those parts into concepts and try to disclose cause-effect relation among them by verifying hypothesis or falsifying thesis.
In the systems approach, dividing reality into smaller components is insufficient. The reality is more technical in this process than that in analytical approach; every component can be named as a subsystem and functioned as a system of its own. Knowledge in this approach would depend on systems; observer is not allowed to work with generalized models appropriate to every subject. The data will depend on environment where components are interacting. That's the reason the data should be contextual not universal like this in the analytical approach.
However the difference is the fact that the goal of the systems approach is wanting to increase the system recognized in the truth, while the analytical approach is to verify hypothesis or falsified thesis. Another difference between both of these approaches is vision of the complete. The analytical totality has a summative character as the systematical hasn't. The latter concerns on the full-rounded systematic view and the synergies are anticipated if all the components work very well, otherwise the result will be small the sum of every component.
Reality as concrete and conformable to law from a structure independent of the observer
Reality as a concrete identifying process
Reality as mutually dependent fields of information
Reality as an environment of symbolic discourse
Reality as a social construction
Reality as a manifestation of human intentionality
Man as stimulus-receiver and responder
Man as social fact
Man as information transformer
Man as role-player and symbol-user
Man as active creator of symbols
Man as intentional conscience
To reconstruct external reality-the empirically general one
To describe entireties in their regularities and breaks
To reconstruct contexts in conditions of information
To understand patterns of social interaction in conditions of symbolic discourse
To know how social the truth is constructed, maintained, and defined
To develop eidetical insight rather than an empirical one
Machine; mathematics; logic
Organism; "natural selection"
Cybernetics; network of information
Role-playing; theatre; culture
Language games; typifications; network of meanings
Surveys; operational definitions
Variations of free imagination; to bracket (epoch) appearances
THE ANALYTICAL APPROACH
THE SYSTEMS APPROACH
THE ACTORS APPROACH
Created from Abnor and Bjerke (1997)
The actors approach sees reality as a social construction constituted by individuals. Observers of social action can't ever stand beyond the area that they are studying. They can be area of the reality. The approach is consequently highly subjective, and the reason is to understand and create new meanings rather than to explain them. According to Abnor & Bjerke, it is important to discuss actors in the actors view, since it indicates a pastime in people to be intentional meaning they can be active, reflective, and creative individuals11.
As mentioned above, Abnor and Bjerke sign up to the concept of a paradigm as reported by T¶rnebohm. According to him a paradigm includes:
1. A conception of reality - What does the business appear to be?
2. A conception of science - Just how do we look at business as a science?
3. A scientific ideal - What do we want from business as a science?
4. Ethical/aesthetical aspects - What attitude if the business creators of knowledge take towards what is done?
As a consequence of the ambiguity of the truth, the data creator recognizes opposite mechanisms that are fundamental drivers of development and progress of world:
"The truth is not independent of us but contain an interaction between our very own experiences that people have as time passes created as well as others" (Abnor & Bjerke, 1997, p. 175).
Burell&Morgan and Abnor&Bjerke use different angles that they draw their paradigmatic assumptions. Their assumptions about social science carry some similarities and dissimilarities which can be discussed below. Burell&Morgan make paradigmatic assumptions about society and its own status from the researcher's perspective. They make a distinction between a conflict society and a harmony society. These assumptions aren't present in the next paradigm's work. For instance, there are numerous dimensions for theoretical and methodological choices, almost all of which were well captured by Burrell and Morgan (1979) whose abstract classication schema for understanding broad streams of social science methods to empirical research has inspired many scholars (Chua, 1986; Laughlin, 1995).
Furthermore, Borell&Morgan make assumptions about the relationship between human nature and the surroundings, and the influence of human beings on the surroundings is essential in the manner researchers view reality. From our point of view, Burell&Morgan's are much clear for all of us to define the reality and the way we obtain knowledge, the desire or the goals to attain.
As mentioned in the choice of theories chapter, we are looking at the assumption of OLI framework, although we know that the best value of a research is in comparison of several theories. Starting from this aspect, we considered that OLI's theoretical bases are Transaction Cost Theory, International Trade Theory and Resource - based Theory. OLI's essential fields of focus is on the study of multinational enterprises and their activities, but also with what conditions must be met in particular with Foreign Direct Investment. The theoretical contributions of Dunning's theory is the fact that - improves the probability of best choice of entry mode through concentrate on broad selection of costs/risk estimates (D. Sharma 1999).
Also known as eclectic paradigm goes back to 1958 but it's been revised for several over time (Dunning, 2000 p. 168). OLI is the abbreviation for three sub-paradigms in this framework, and is for Ownership, Location and Internalization. The framework includes and describes the three factors relevant for the firms engaged in international expansion.
The Ownership sub-paradigm is approximately owning of resources, skills, capabilities which contributes to competitive advantages (Hitt et al 2001).
According to Dunning (2000, p. 164) to be able to truly have a success in the foreign market, the new entrant must have a sustainable and unique competitive advantage.
These sustainable competitive advantages are grouped into three main segments described by Dunning (2000, p. 164):
Possessing and exploiting monopoly power.
Having unique and sustainable resources and knowledge, predicated on superior competences and technical efficiency in accordance with company's competitors.
Skilled and competent managers to recognize the valuable resources and the way to benefit on long-term from exploiting the determined resources.
Michael Porter (1980, p. 37) discuss the monopoly power as an edge to the firm which holds the power to overcome the new potential entrants by positioning themselves as a barrier or for instance to disadvantage the entrants as it pertains to costs as the possession of proprietary technology by the monopolist. Another strategy used by the monopolist is to employ the superior brands, to be able to hold the rivals out of the targeted market. Possessing and taking a monopoly power can be viewed as a competitive advantage and provides to monopolist cost advantages as well.
"To generate high fences around their businesses, brewers couple brand identification with economies of scale in production, distribution and marketing" (Porter 1980 p. 37).
The possession of unique and sustainable resources internally, any company can generate and earn profits by applying them in the market (Tallman & Fladmore-Lindquist 2002). This is the centre of the resource based view and acknowledge by Dunning in the OLI framework.
Opposite to the aforementioned factor of monopoly power, this segment is effective to the business due to build up of new resources and not by exploiting the already used ones. This creates also an so called, long-term competitiveness
Whernerfelt (1984 p. 178) discusses optimal growth, and the importance of the new developed resources to sustain not only the growth but also with an advantage in facing the changing environments. To be able to have an FDI attractive, is insufficient to have the competitive advantage, it is much more better invest directly into the foreign market rather than using the export advantages solely in the home market.
The Location attractiveness sub-paradigm assumption is a foreign market should favor the neighborhood production to export from the business's market or other markets where the company is present. Lower labor costs, more favorable legislation, governmental trade barriers, superior production process (Hitt et al 2005 p. 472).
The Internalization sub-paradigm talks about the entry in to the foreign market through some kind of inter-firm agreement such licensing, engaging in FDI through investing in green field production facilities, or by purchasing a company in the target market (Dunning 2000 p. 164).
It can be based the simple assumption of whether market transaction deserve a lesser cost or whether to conduct the activity internally. In accordance with Dunning (2000 p. 179), the transaction in the market generally is positive associated imperfections of the marketplace, this permits companies to charge a higher price as asymmetries between buyer or seller costs associated with gathering information.
This is of course due to the real fact that a firm on a foreign market generally will have less knowledge as they have on the domestic market which is worsen by the language factors and cultural differences.
In the next part we will examine the underlying assumptions of the OLI theory. In order to analyse it, we use the paradigmatic framework of Burrell and Morgan.
The analysis will be completed by looking at the paradigmatic aspects which was found that occurs in the dimensions of ontology, human nature and epistemology. Indeed, it is necessary to comprehend the underlying assumptions.
In fact, Burrell and Morgan had organized theories depending on the definition of reality and the objectives pursued. The opposition between subjectivism and objectivism come from an extended tradition of social science and in order to comprehend the scope of the OLI theory it is interesting to review if it has a purpose of regulation or radical changes.
5. 1 Ontology
The OLI advantages result from rational cost analyses, this is the key argument to aid that the OLI theory matches with the thought of realism, which describes the social world as real and tangible.
On the contrary, nominalism postulates that reality is shaped by individuals in interaction with one another.
But here the eclectic paradigm comes from an objectivist approach; this can be a rational analysis based on costs and risks studies. In respect to ontology this implies a knowledge of reality as a genuine social world and external to an individual human being.
Indeed the decision to internationalize is not driven by a subjectivist point of view the criterion used are objectivist because that decision is based on an objective arbitration: FDI as market entry tool is chosen when the O, L and I advantages are substantial. Inside the OLI theory it isn't the human actions and interactions which create the thought of reality.
Then, the theory serves as a objectivist since it takes into account the concrete structure of reality which is in addition to the individual. As the OLI perspective is highly pragmatic oriented, the assumption of Burell&Morgan points on the functionalist for Dunning's paradigm because the OLI framework matches with an objective dimension.
5. 2 Human nature
Within the OLI theory, one can assume that the researcher sees the social environment as outside the individual. For the reason that framework people and the environment do not codetermine one another because your choice to internationalize is taken according to a particular environment. So we can consider that the eclectic paradigm is the consequence of a deterministic perspective.
The decision whether to internationalize depends upon the average person environment, within Dunning's theory, the average person is very dominated by its environment.
It may be added that the OLI theory leans more towards the regulation than radical changes and leans more towards objectivism than subjectivism. Because of its view on ontology, epistemology and human nature, the analysis indicates that the OLI theory give the explanation of entering a country taking the social world as real and tangible, seeking to define and predict what happens in the social world, and apprehending the social environment as beyond your individual.
5. 3 Epistemology
Positivism describes an epistemology which tries to define and predict what happens in the social world. The positivist assumes that any researcher can be objective and conduct his hypothesis as an external observer. Even as we stated before, OLI theory originates from the analysis of the ownership advantages, the localization advantages and the integration advantages.
Those advantages can become more or less quantified in conditions of opportunities and risks for a firm like Jarlberg's. So its assumptions tend to be more predicated on external observations.
In order to understand the social world positivism theorists study the constituent parts of a social phenomenon. Researchers are looking for relationships between different phenomenons, if they can observe cycles or regularities then they can extract predictions because of their observations. The OLI framework originates from this kind of observations.
Given the actual fact that it's a prescriptive approach, it can be seen as a general "prediction" from Dunning in order to make the good decision about the marketplace entry mode. But this is the consequence of observations and analysis, so one can say that the eclectic paradigm matches with the positivism approach.
The OLI paradigm fit with the idea of a world consisting of hard, tangible and which is dependant on stable structures. Then, the epistemological assumption of the OLI theory can be explained as objective and leans to positivism.
As can look from the contributions to the problematic of entry modes, it has not yet been possible to provide a coherent generic and operational theory as to entry mode problematic. But according to Eclectic Framework, companies market a country to enter through Foreign Direct Investment in the foreign country where specific enterprise and local advantages lead to selection of a lot more integrated entry modes predicated on the behavioral assumptions as bounded rationality and opportunism. OLI offers a useful frame of mention of connect the paradigm to the performance of enterprise.
On the other side, OLI's truth scientific and utility scientific has problems of establishing demarcation between the two different concepts.
If this is actually the case, it means that Jarlsberg is a company that operates according to the paradigm of Burell&Morgan, from a target dimension as functionalist paradigm.
In this project we used the eclectic theory of Dunning to help us gain more understanding about the market entries; however, we mentioned earlier that there is no theory that we can grant it the amount of integration in describing the market entry choice. Based on our research regarding this topic, we discovered that 1 theory is always insufficient to repay all the dimensions of our topic.
Thomas S. Kuhn (1970) claims that the truth value of theories should always be
evaluated through mutual comparison between several theories, where the theory containing the highest degree is chosen.
From these words we assumed and understood that usually using 1 theory is not enough to spell it out and evaluate an issue, especially if the problem is crucial like the marketplace entry choice.
Adding to this, according to find 3, the OLI paradigm is much more likely covering the objective dimension (functionalist) only, which leads us to search for another theory which could cover the subjective dimension.
Our approach in discussing the marketplace choice might have changed to using the network approach side by side with the eclectic theory to protect the subjective dimension. The essential assumption in the network approach is usually that the firm cannot be analyzed as an isolated actor but needs to be viewed in relation to other actors in the international environment. The relationships of a firm within a domestic network can be used as connections to other networks in other countries (Johanson &Mattson, 1988).
The network theory could have helped us understand the subjective dimension of the marketplace entry choice; because we assume that it covers the subjective part including the radical humanist framework. Theorists in the radical humanist paradigm are concerned with releasing social constraints that limit human potential. As the network approach works on helping the firm in building business networks domestically to be bridges to other networks far away and internationally to help the firm has more connections which will be used as a support to the firm in case there is issues or problems. And by that, the network theory helps attaining the vision of the theorists in the radical humanist paradigm.