Formalizing Internationalization in the Eclectic Paradigm

The paper presents a simple general equilibrium model that formalizes internationalization in the Eclectic Paradigm based on a reconfiguration of concepts taken from the new classical economics literature. The model enables us to address simultaneously the role of ownership, location and internalization advantages, and their interaction, in the emergence of the Multinational Enterprise (MNE) through a set of mathematical inequalities. Our model offers a bridge between the detached perceptions of the MNE often held by international trade economists and international business scholars and makes specific aspects of the eclectic paradigm empirically testable