Hymer cited in Dicken, 1992 was the first to suggest that foreign direct investment could occur only if the investing company possessed a particular advantage over domestic companies. Domestic companies understand their local business environment better, and foreign companies lack such knowledge initially. To compete in the overseas market foreign companies must possess some kind of advantage. Such advantage can be of many different types, but the most obvious is size and market power.

   Technology of production, marketing and organisation are particularly important sources of advantage, and in the broadest sense of know-how an intangible asset easily transferable from one location to another. Caves cited in Dicken, 1992, for example, emphasises the advantage a particular brand image may give over less known competitors. He states that a characteristic for many companies, especially in consumer goods, is that they strive to differentiate their products from their competitor's products.