External advantages in differential
products
A strong correlation exists between multi
nationalisation and product differentiation. This may indicate an application
of the parent's (acquirer's) good reputation. A firm that has developed a
reputation for superior products in the domestic market might find acceptance
for the products in foreign markets, as well.
Example
In the 1920s, the early days of the U.S.
auto mobile industry, cars were exported to Europe in large numbers. This was
before the auto industry was developed in European countries. The advantage of
the U.S. mass production facilities, and know how made the American cars
cheaper despite the high foreign tariffs and motivated foreign direct
investments. The tables were then turned. First, Volkswagens came from Germany
to the United States. Then cars from Japan became widely accepted in the United
States. Later, manufacturing operations were established, by foreign makers in
the United States.