Arguing that internalization alone could probably not explain all cases of foreign direct investment, Dunning (1980) proposed an eclectic approach in order to provide a more comprehensive explanation for the phenomenon. According to Dunning, international production is the outcome of a process in which ownership, internalization and localization advantages work together. The ownership advantages are firm specific in the sense that the firm has control over them. They embrace patents, know-how, labor skills and other forms of superior production technology, control over markets and trade monopolies, scale advantages, managerial capabilities, and so forth. These factors determine the firm’s competitive position in relation to other firms. The internalization advantages arise from the existence of market imperfections, as discussed above. They explain the firm’s reluctance to engage in licensing