Theories of Internationalisation
Submit a paper on the topic Theories of Internationalisation and Relevance in Explaining Global Patterns of Foreign Direct Investment. In effect, countries can gain profits if they direct their activities to the generation of products and services which are most profitable. This theory relates the situation where a country creates products and services for its people, and for export in terms of surplus. As a result, it is favourable for countries to import the products and services where they also have an economic disadvantage (Morgan and Katsikeas, 1997). The economic advantage and disadvantage may be based on differences in available resources, labour, and technology. The classical theory argues that the foundation of international trade would come from the differences in the qualities of production and available resources which are also based on differences in natural and acquired advantages (Morgan and Katsikeas, 1997). Another theory of internationalisation contrasts with the classical trade theory. The factor proportion theory discusses that countries usually produce the export products and services which support significant production advantages that they have, and they will import the products and services which would need large scores of production factors that may be limited (Hecksher and Ohlin, 1933). This theory supports the idea of economic advantage by evaluating the endowment and costs related to factors of production (Morgan and Katsikeas, 1997). The above theories do not completely explain the current trends in international trade. For one, the rise of technological development and of multinational corporations during the 1960s called for new theories on international trade. At such time, the product life cycle theory relating to international trade was considered a significant basis in explaining trade patterns and MNC expansions (Morgan and Katsikeas, 1997).