The eclectic theory states that firms undertake foreign direct investment when the features of a particular location combine with ownership and internalization advantages to make a location appealing for investment.

Question

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The statement accurately describes the eclectic theory of foreign direct investment, which proposes that firms invest in foreign markets when ownership advantages (such as proprietary technology or brand reputation) and internalization advantages (such as cost savings from integrating different stages of production) are combined with location-specific advantages, such as access to resources, markets, or talent. The theory emphasizes that the decision to invest abroad is not driven by incremental cost considerations alone but by a more complex interplay of strategic factors.

The Eclectic Theory States That Firms Undertake Foreign Direct Investment