According to Dunning's OLI-model, a global allocation of the production depends on the analysis and understanding of three advantages: Ownership-Specific Advantages, Location-Specific Advantages and Internalization-Incentive Advantages (Dunning & Lundan, 2008), thus the title OLI-model.
Ownership-specific advantages are advantages that the company has vis-a-vis companies in the particular markets in which it operates or plans to operate.
These internalization-incentive advantages are particularly relevant, if ownership-specific advantages have to be protected.
Hence strengths and weaknesses are relevant in connection with analysing the ownership-specific advantages, and opportunities and threats are relevant in connection with analysing the location-specific advantages.
Our analysis of 1,355 Chinese private enterprises shows that their ownership-specific advantages in areas such as corporate governance, inherited advantage from mergers and acquisitions of state-owned companies, and inward internationalization increase the level of outward internationalization.
Their moderating effect on the link between some ownership-specific advantages and venturing is negative, suggesting a substitutive role of experience in interacting with ownership-specific advantages with the process of internationalization.
While both groups seek ownership-specific advantages in internationalization, developing country private firms are motivated in parallel to avoid environmental hardships at home, such as institutional obstacles and market imperfection residuals.
In the Chinese context, ownership-specific advantages
mainly take the form of specialized knowledge and relationships with the government and customers in the PRC.
In particular, we examine the question whether capital intensity, skill intensity, and economies of scale explain all of the labour productivity differences between foreign and local firms, or whether foreign firms enjoy some ownership-specific advantages, such as proprietary technology and management expertise, etc.
In order to ascertain whether the labour productivity differences are due to capital intensity, skill intensity, and economies of scale or to other ownership-specific advantages, we next estimate the regression models (1) to (3).
Even after taking into account the differences in capital intensity, skill intensity and economies of scale we find that foreign firms are more productive than their local counterparts, this suggest that foreign firms enjoy some ownership-specific advantages.
The first is Ownership-specific advantages
or firm specific advantages (FSAs), these are advantages which reside at the firm level.