Dunning 1980 cited in Dicken, 1992, p 131 defines location-specific factors as "those which are available, on the same terms, to all firms whatever their size and nationality, but which are specific in origin to particular locations and have to be used in those locations".

   Countries with different income levels tend to have a different structure on demand. The type and mix of goods demanded tend to vary according to income. Variations in the size and composition of markets therefore make an important location-specific factor. Another factor is the influence of national governments, in terms of political climate and national attitude towards foreign direct investments. A company's perception of psychic distance, language and culture, between potential locations for investment and the home country also plays a role in the investment-location decision process.

   One important group of location-specific factors is the variations in production costs. Dunning argues that the single most important location-specific factor, at least at the global scale, is labour. The locational significance of labour as a production factor is the geographical variations in wage costs. Differences in wage both between developed countries and, especially, between developed and developing countries are important factors in the investment-location decision process.

   The main value of Dunning's broad explanation of international production is that it incorporates the diversity of transnational investment that is such a major feature of today's global economy. Dunning's eclectic theory has, however, been criticised as to be only a list of factors likely to be important for the explanation of the modern international company rather than the explanation itself.