Edith Penrose and a learning-based perspective on the MNE and OLI

Citation

Pitelis, C. (2007), "Edith Penrose and a learning-based perspective on the MNE and OLI", Development and Learning in Organizations, Vol. 21 No. 5. https://doi.org/10.1108/dlo.2007.08121ead.004

Edith Penrose and a learning-based perspective on the MNE and OLI

Edith Penrose and a learning-based perspective on the MNE and OLI

Pitelis C. Management International Review, 2007, Vol. 47 No. 2, Start page: 207, No. of pages: 13

Purpose – to extend Dunning’s multinational company (MNC) ownership- location-internalization (OLI) paradigm using Penrose’s theory of firm growth (TGF). Design/methodology/approach – sees the three OLI components as firm-specific advantages (FSA), traces development of MNC theory to Hymer’s question about why firms internalize when investing overseas, but identifies deficiencies in the OLI paradigm regarding the firm as a strategic actor, and absence of a cognitive/learning dimension. Looks at ownership, location and internalization in turn, argues that TGF provides an intra-firm efficiency-based explanation of ownership advantages, that MNC locate where resources add value to the firm, and that the term “integration”, as used by Penrose, represents internalization, discusses interaction between ownership, location and internalization, and contends that TGF helps explain the whether, what, when, where and how to integrate/internalize. Concludes by presenting three research propositions: that MNC when considering foreign investment attempt to simultaneously optimize OLI advantages; that managers consciously take sub-optimal decisions today when/if they expect those decisions to prove superior under future conditions; and that when imperfect decisions are made managers will shape the perceived productive opportunity to make their decision succeed. Practical implications – advises managers to use extant knowledge while developing new knowledge, to influence internal and external environments, and to learn from mistakes. Originality/value – maintains that the OLI paradigm is improved by incorporating learning, and resource- and knowledge-based dimensions.ISSN: 0938-8249Reference: 36AL097

Keywords: Business development, International trade, Knowledge management, Learning, Multinationals, Organizational theory, Resources