When companies want to exploit a firm-specific asset abroad they will more likely invest in own facilities rather than through, for example licensing if transaction costs are high. The more intangible the firm-specific asset is, the greater the incentive for internalisation will be. Organising transactions may be carried out through two methods, the price system or hierarchy. The problem with the price system may be that some market participants take advantage of measurement difficulties to overprice and/or underperform. To avoid this 'cheating' behaviour companies internalise and integrate transactions.

   John Dunning developed an eclectic paradigm derived from a variety of theoretical approaches to explain international production. When companies' ownership-specific advantages are better exploited by the company itself rather than by selling or leasing them to other companies the company internationalises the use of its ownership-specific advantages. Location-specific factors play an important part, in combination with internationalisation of ownership-specific advantages, in determining whether or not, and where, overseas production occurs.