The Decision-Making Process of Foreign Direct Investment in Singapore - A multi-case study on three Swedish multinational corporations and Sweden’s Ambassador

University essay from Lunds universitet/Ekonomisk-historiska institutionen

Abstract: Even though the eclectic paradigm was founded approximately 50 years ago, it remains among the leading frameworks for firms determining whether to engage in foreign direct investment (FDI). The framework asserts that multinational companies (MNCs) only will engage in FDI if they have ownership, location, and internalization advantages. There is currently a research gap pertaining to if there are any exceptions to the paradigm. Additionally, the framework has received criticism for failing to predict new opportunities arising from globalization. For instance, MNCs during the 21st century are no longer seeking cost advantages to the same extent as implied when the framework was first presented. This shift becomes apparent when looking at lists of the most expensive countries and the nations with the highest FDI inflows, where Singapore tops both lists. Thereby, this thesis explored if the eclectic paradigm has been applicable in the decision-making process for Swedish MNCs based in Singapore. Through four interviews with Swedish MNCs based in Singapore and Sweden's ambassador to Singapore, this thesis finds that firms can engage in FDI despite not possessing all three O-L-I advantages. It is also found that the decision-making process is more complex than determining whether the MNC possesses the three advantages. Additionally, adding the concept of Global City theory to the eclectic paradigm made the results more applicable to this case study.

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