O.L.I theory to explain Hewlett Packard’s decision to invest

John Dunning’s “Eclectic Theory” states (International Business Chapter 5 – theories, no date) that for a multinational enterprise to engage in the prospect of Foreign Direct Investment (FDI), three situations will occur. These are; 1) ownership specific advantages, 2) Location specific advantages and finally internalisation incentive advantages. Also known as the O.L.I theory. Using the O.L.I theory, here were some of the advantages that Hewlett-Packard considered when making the decision to invest in Singapore (FDI)

When Hewlett Packard was looking into Singapore, the felt that with the transfer of both their tangible and intangible assets they could effectively exploit the advantages Singapore as a location had to offer. They needed to look at property rights, product innovations, decide if their was a common governance that was exclusive to the firm at least in the short term and favoured and/or exclusive access to product markets.

Although Singapore as a location offered a great opportunity for Hewlett Packard, the company itself had plenty of ownership oppo

The O.L.I theory proposes that if all the costs of out-sourcing out weigh the cost of complete internalisation of an organisation, then it would be favourable for Hewlett Packard to invest into Singapore, as long as their assets are protected as much as they can be and they do not run the risk of losing control of quality processes and increasing opportunities for competitors. By directly investing into Singapore, Hewlett Packard has kept control the intellectual property and other assets, while still being able to obtain the benefits that Singapore has to offer as an investment location.

rtunities to offer in return. With the movement of core competencies from across the globe, Hewlett Packard was able to ensure they trained to staff to work to their very high standards thus increasing knowledge within the local workforce, innovative and new technology in both the consumer goods process as well as the manufacturing process itself (the first Asian language printer).

When deciding to internalise the enterprise or to create contracts with certain licensee’s in order to cut costs, some factors need to be considered; the possession of propriety information and the

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