Several theories attempt to explain why firms undertake foreign direct investment. These theories include the international product life cycle theory, market imperfections theory, the eclectic theory and the market power theory. Which of these theories seem most appealing to you? Why is it appealing? Can you think of one or more companies that seem to fit the pattern described by the theory? In your opinion, what faults do the alternative theories have?
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This solution of over 300 words discusses why firms undertake foreign direct investment and which theory is more appealing and what the alternatives are.