1, Dr. Steven H. Harmo.) Men.

Born in Canada, an economist who studied and taught in the United States, and a professor at Massachusetts Institute of Technology, first established the theory of international direct investment-monopoly advantage theory, which pioneered the theory of international direct investment. 65438-0960 completed the doctoral thesis "Internationalization of Domestic Enterprises: Research on Foreign Direct Investment". After this article was published, it did not attract the attention of the world. Because the rapid development of international investment practice has verified its theory, it has become one of the most influential schools. By the time 1976, the theory was officially published, he had been dead for two years.

2. The formation of monopoly advantage theory.

Using the monopoly competition principle of western manufacturers, this paper makes an empirical analysis of American foreign investment from 19 14- 1956, and draws the following conclusions:

(1) 19 14 years ago, the United States had large-scale direct investment, but foreign securities investment did not;

(2) In the 1920s, both of them grew rapidly;

(3) In 1930s, foreign direct investment declined slightly, while foreign portfolio investment increased;

(4) After World War II, direct investment increased rapidly, while securities investment developed slowly;

(5) Regional distribution, there is little difference between Canadian direct investment and 1929 securities investment. In the same period, the ratio between the United States and Europe was 2. 5: 1。

Traditional theory can't explain this scientifically. Harmo thinks:

(1) American foreign investment lies in monopoly advantage and incomplete market;

(2) Imperfect market competition is the fundamental reason for multinational companies to make international direct investment;

(3) If the operation of products and production factors is completely effective, foreign investment will not happen;

(4) Due to imperfect competition, multinational companies have monopoly advantages (technological advantages, advanced management, capital, information, international reputation, sales, economies of scale, etc.). );

(5) Compared with multinational companies, enterprises in the host country have advantages in humanities, geography and system, but multinational companies still have net advantages.

3. The development of monopoly advantage theory.

(1) H.G. Johnson believes that the monopoly advantage of multinational companies lies in "knowledge transfer" (1970);

(2) R. E. Caves believes that the monopoly advantage of multinational companies lies in their ability to produce differentiated products (1971);

(3) knickerbocker put forward the "oligopoly reaction theory";

(4) S Hirsch put forward the "Comparative Theory of Export Trade and Foreign Investment" from the perspective of cost (1973), namely:

Multinational companies choose to go abroad.

When the sum of domestic production costs and export sales costs of multinational corporations is less than the sum of foreign production costs and transportation costs, multinational corporations choose export trade to participate in the international economy in order to obtain maximum profits; On the other hand, they choose to invest abroad to participate in the international economy in order to obtain the maximum profit.

(5) F R Root believes that the main reason why multinational companies choose to invest abroad is to avoid the risk of technology leakage in licensing transactions and continue to maintain the technological monopoly advantage (1978).

4. Evaluation of monopoly advantage theory.

Positive aspects:

(1) Monopoly and imperfect market competition replace perfect competition to explain international capital flows;

(2) Distinguish between securities investment and direct investment;

Negative aspects:

(1) The products of a specific historical stage have certain limitations and cannot explain the foreign investment behavior of small and medium-sized enterprises without monopoly advantage;

(2) There is no problem of site selection.

(B) product cycle theory

Professor R Vernon proposed in the article 1966 "International Trade and International Investment in Product Cycle" that the concept of product cycle should be used to analyze international trade and international investment, and that the product cycle has four stages.

1, the main points of product cycle theory:

(1) In terms of trade, as products change from "innovation" to "standardization", innovative countries will change from exporting countries to importing countries, and countries with lower labor costs will change from importing countries to exporting countries. Moreover, the periodic evolution of new products has gradually shifted to developing countries;

(2) In terms of investment, the specific contents are as follows:

Investment in state-owned production and technology advantages, the host country has geographical advantages of resources and cheap labor. If the two are combined, investors can overcome the extra costs and risks brought by production abroad.

In the first stage, the new product has not yet been finalized, and the demand elasticity of price is low. At first, the production of new products tended to choose the production place in China.

In the second and third stages, although the technology has not reached standardization, it has matured, and enterprises are more concerned about production costs, especially after the emergence of competitors. The choice of export or foreign investment depends on the comparison between the marginal production cost plus transportation cost of export commodities and the expected production cost of import market. If the former is lower than the latter, the innovative country chooses to export, otherwise it chooses foreign direct investment (the new product cycle ends in the United States and continues in Europe);

In the fourth stage, technology has been standardized, price is the basis of competition, and investment choice is in developing countries (the new product cycle ends in Europe and continues in developing countries).

2. Development of product cycle theory.

Vernon's product cycle theory mainly provided a theoretical framework for the expansion of the United States to Europe in the 1950s and 1960s.

It only shows that a manufacturer initially entered foreign markets as an investor and could not explain the problems of two-way investment and reverse investment, so he developed his own theory: the product cycle is divided into three stages (oligopoly stage of invention, mature oligopoly stage and aging oligopoly stage), and no longer emphasizes that the United States is the only source of new products, while Europe and Japan are also the sources of new products. The oligopoly stage of invention and creation: the place of production should be in the country where the invention and creation are located, so that the production process can be combined with R&D and marketing activities;

3. Theoretical evaluation of product cycle

Positive aspects:

(1) This theory is applicable to the motivation and location choice of foreign direct investment of American multinational companies at that time;

(2) This theory can be called both international direct investment theory and international trade theory.

Negative aspects:

(1) This theory can't explain the behavior of developed countries' foreign investment in producing non-standardized products after 1980s.

(2) This theory can't explain the investment behavior of foreign raw material industrial bases;

(3) This theory cannot explain the foreign direct investment behavior of developing countries.

Mature oligopoly stage: the monopoly advantage of multinational companies based on innovation disappears, and economies of scale become the basis of their monopoly advantage. In order to be in a favorable position in the competition, multinational companies from all countries directly invest in the main markets of both sides, weakening each other's competitiveness (offensive or defensive investment);

Aging oligopoly stage: the monopoly advantage of multinational companies based on economies of scale has disappeared. Due to the entry of a large number of competitors and fierce competition, some manufacturers withdrew from this field. At present, the main factor of multinational companies' foreign investment location selection is production cost.

(C) Internalization theory (or market internalization theory)

1, representative figure

P.J. University of Reading, UK. Buckley M. Carson (The Future of Multinational Corporations 1976) and Canadian scholar A.M. Rugmann.

2. Theoretical core

In transnational business activities, companies face various market obstacles. In order to overcome obstacles, make up for the inherent defects of the market mechanism, and maximize profits, all kinds of transactions are carried out among the companies to which the company belongs, forming an internal market without going through the external market. When internalization transcends national boundaries, multinational corporations appear, and the motivation of internalization is the main reason for enterprises to invest abroad.

3. Three important concepts

(1) Market internalization

It refers to establishing a market within a company, replacing the original fixed external market with the internal market, and price distribution plays a lubricating role in the internal market. Market internalization is an important business strategy of contemporary western multinational companies.

(2) Market failure (or market failure)

It refers to the situation that it is difficult for enterprises to protect their own rights and interests when transferring intermediate products, and it is also impossible to rationally allocate their own resources through the market to ensure the maximum economic benefits of enterprises. Imperfect competition is not caused by economies of scale, oligopoly, trade protectionism or administrative intervention, but by the increase in transaction costs of enterprises due to the failure of some markets.

(3) Transaction costs

Refers to the price paid by an enterprise to overcome the transaction obstacles in the external market.

4. Motivation of market internalization

Knowledge products have special attributes, and the market structure of knowledge products and the dominant position of knowledge products in modern enterprise management determine that their market internalization is the strongest. Knowledge products and their transactions have the following characteristics:

(1) takes a long time and costs a lot.

(2) provide a monopoly advantage to the supporters, while the transfer will support the opponents.

(3) Due to the incompleteness of the market, the price of knowledge products is not easy to determine.

(4) The externalization of knowledge products will lead to the increase of transaction costs.

For the above reasons, enterprises internalize their knowledge products. In addition, capital-intensive manufacturing intermediate products, agricultural and sideline products, mineral resources products, enterprises also have a strong motivation to internalize.

5. Benefits and costs of market internalization.

(1) Market internalization income

The benefits of market internalization come from eliminating the diseconomy of external markets, including the following five aspects:

Unified and coordinated economic benefits

Economic benefit of effective differential price

Economic benefits of eliminating buyer's market uncertainty

Economic benefits of eliminating international market instability

Economic benefits of maintaining technological advantages

The economic benefits of avoiding government intervention.

(2) the cost of market internalization

Resource cost

Communication cost

country risk

service charge

6. The characteristics of internalization theory are different from monopoly advantage theory.

First of all, monopolizing the market is not entirely a prerequisite for transnational operation.

Internalization eliminates the incompleteness of the market;

Secondly, incomplete market monopoly excludes competition.

Incomplete market failure

Third, the significance of transnational operation of technological monopoly advantage.

The lowest transaction cost ensures the advantages of transnational operation.

Finally, the theory of monopoly advantage is applicable to developed countries.

Internalization theory is applicable to both developed and developing countries, that is, it is applicable to both domestic and foreign countries.

7. Evaluation of internalization theory

On the positive side: One of the most popular and influential theories of international direct investment at present, some people regard it as a general theory or a general theory.

Negative aspects: the location choice of foreign investment is not explained. Kiyoshi Kojima's comparative advantage theory or marginal industry expansion theory.

(1) Theoretical background.

Micro-international direct investment theory can basically draw a conclusion:

Only large enterprises with abundant capital and high technology have the advantage of monopolizing the market and the ability to engage in foreign investment. After the mid-1970s, Japanese academic circles began to raise objections to the theory of monopoly advantage. From the analysis of Japan's situation, the main body of foreign investment is mostly small and medium-sized enterprises, which have labor-intensive technological advantages and are easily accepted by developing countries.

Since the 1970s, Professor Kiyoshi Kojima, a Japanese scholar studying in Britain and the United States and a famous international economist in hitotsubashi university, Japan, has put forward the theory of marginal industrial expansion, which has produced great repercussions not only in Japan, but also in Europe and America, and is known as "island thought", "island proposal" and "Kiyoshi Kojima model".

(B) the theoretical core

Foreign direct investment should come from marginal industries that are already at or about to be at a comparative disadvantage in the home country (investment country) (this is also an industry with obvious or potential comparative advantages in the other country).

Conversely, this theory is also called marginal industry expansion theory.

(C) Inference of the theory of comparative advantage

Inference 1: The comprehensive theory of international trade and foreign direct investment can be based on the principle of comparative advantage (cost). International trade is carried out according to the established comparative cost (expanding comparative advantage), while international direct investment can create new comparative cost (expanding comparative cost).

Inference 2: The relationship between Japanese-style foreign direct investment and foreign trade is not a substitute relationship, but a complementary relationship, which is reflected in the creation and expansion of foreign trade by foreign direct investment, and Japan's foreign direct investment is trade-oriented.

Inference 3: judging foreign economies should be based on the principle of "comparative cost", that is, using "comparative comparison formula" to make judgments and decisions.

Inference 4: In international direct investment, the investing country and the host country transplant from the industries with the smallest technology gap in turn, and the small and medium-sized enterprises in the investing country are the undertakers of this transplant (the technology gap between such enterprises and the host country is small).

Inference 5: International direct investment can produce comparative advantages for both the investing country and the host country, and can create higher profits.

(D) the application of comparative advantage theory

Proposition 1: Japan's direct investment policy oriented to resource development-non-equity arrangement;

Proposition 2: Japan's policy of industrial direct investment in developing countries-"the role of teachers";

Proposition 3: Japan's Direct Investment Policy to Developed Countries-"Interactive Investment in Agreed Industries"

(E) Evaluation of the theory of comparative advantage

1, the theory of comparative advantage analyzes the international direct investment between developed countries and developing countries based on vertical division of labor, which is different from the international direct investment between developed countries based on horizontal division of labor analyzed by Harmo and Vernon.

2. The research object is Japanese multinational companies, which reflects Japan's desire to seek the best development mode in the field of international production. Moreover, this theory is more in line with Japan's foreign investment practice in the 1960s and 1970s.

3. This theory can't explain the foreign investment behavior of developing countries, nor can it explain the practice of Japan's foreign direct investment after 1980s (at that time, Japan's foreign investment was a trade substitution rather than a complementary investment and trade). Deng Ning's international production compromise theory.

(a) the representative figure of this theory-J. H. reminders

He is a famous scholar with great influence in the field of international direct investment. 1957 received his Ph.D. degree from Southampton University, UK, and his doctoral thesis "American Investment in British Manufacturing Industry". In addition to being a professor at the University of Reading, he is a visiting professor at the University of California, Berkeley, the University of Western Ontario, Boston University and Stockholm School of Economics, and an economic adviser to the United Nations, the World Bank and multinational corporations.

He put forward the eclectic theory of international production in the article "Location of Trade and Economic Activities and Multinational Enterprises: Discussion on the eclectic theory" from 65438 to 0977.

(2) Theoretical background.

There are two reasons:

First, the pattern of international direct investment has changed greatly after the war;

Subject diversification

Decentralization of the investment sector

Diversification of capital flows

Diversification of forms of direct investment

Second, there is a lack of a general theory of international direct investment.

(C) the theoretical core

Ownership advantage+internalization advantage+location advantage = foreign direct investment

Deng Ning thinks that ownership advantage is only a necessary condition for direct investment, not a sufficient condition, so he adds internalization advantage to ownership advantage. In his view, the purpose of internalization is only to maintain and expand the monopoly advantage, and combining the two groups of advantages still cannot explain the motivation of direct investment. Therefore, he introduced a set of location factors, which restricted the location of multinational companies' foreign direct investment and its international production layout. Location advantage constitutes a sufficient condition for foreign investment.

In other words, only with these three advantages can foreign direct investment be carried out; If there are only the first two advantages, choose the export trade mode; If there is only ownership advantage, choose the technology transfer method.

Three important basic concepts

Ownership advantage-refers to the assets owned by a country's enterprises that foreign enterprises do not or cannot obtain and their ownership. Including: technical advantages, enterprise scale advantages, organizational management advantages, financial and monetary advantages.

Internalization advantage-refers to the advantage that multinational companies can and are willing to replace the original fixed external market, reduce transaction costs and maximize profits.

Location advantage-it is an indispensable factor endowment advantage of the host country and the advantage of encouraging or restricting policies by the host government.

Including:

cost of labour

market demand

Tariff and non-tariff barriers

government policy

(E) Evaluation of international production compromise theory

1, which is considered as the most complete and widely accepted production mode in the world, has strong practicability;

2. It is considered to be a collection of strengths and truly establish a general theory;

3. "Creating a theory on the unification of international trade, foreign direct investment and international agreements";

However, this eclectic theory also has many shortcomings:

1, this theory takes profit maximization as the goal of multinational corporations, which contradicts the diversification goal of multinational corporations;

2. This theory only focuses on private individuals and cannot scientifically explain official investment activities;

3. Comments by Buckley and Carson: The three advantages and their development relationship in the process of time are unclear, the factor classification system lacks dynamic content, and it is unscientific to separate the ownership advantages.