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Keywords:

  • multinational enterprise;
  • competitive advantage;
  • eclectic paradigm;
  • ownership advantage;
  • internationalization

This article challenges the view that competitive advantage is a necessary condition for the emergence of the multinational enterprise. It formally derives the conditions under which multinational enterprises may emerge without possessing a competitive advantage vis-a-vis their rivals. This counterintuitive argument is based on three insights: (1) the ability of a larger number of disadvantaged home country entrepreneurs to enroll workers in the host country more efficiently than a smaller number of advantaged host country entrepreneurs; (2) asymmetric liability of foreignness for home and host country entrepreneurs; and (3) the ability of location and internalization advantages to substitute for ownership advantage.