This monopoly advantage can be divided into two categories:
First, the advantages of knowledge assets, including all intangible assets such as production technology, management and organization skills and sales skills;
One is the advantages of economies of scale brought by the large scale of enterprises. The incompleteness of the market is the fundamental reason for foreign direct investment, and the monopoly advantage of multinational companies is the condition for foreign direct investment to make profits.
1, incomplete market
Incompleteness arises from four aspects:
(1) The product market is incomplete. This is mainly related to factors such as commodity specificity, trademark, special market skills or price alliance.
(2) Incompleteness of factor market. This is mainly caused by special management skills, convenience of capital market and technical differences in patent system protection.
(3) Incomplete market caused by economies of scale;
(4) Due to the government's policies on taxation, tariffs, interest rates and exchange rates, the market is incomplete.
2. Monopoly advantage
(1) Market monopoly advantage. For example, product performance differences, special sales skills, and the ability to control market prices.
(2) Production monopoly advantage. Such as management skills, financing ability, capital advantages, mastered technology patents and proprietary technologies.
(3) Advantages of economies of scale. That is, through horizontal integration or vertical integration, efficiency can be improved in the connection of supply, production and sales.
(4) The barriers to market entry or exit caused by government taxes, tariffs and other trade restrictions lead multinational companies to take advantage of their monopoly advantages through foreign direct investment.
(5) Information and network advantages. 1. Cause analysis: Under the condition that the host country's market is incomplete, multinational companies can use their monopoly advantages to exclude free competition and maintain monopoly prices to obtain excess profits.
2. Conclusion: Foreign direct investment is an action taken by oligopolistic enterprises with certain advantages in pursuit of controlling the incomplete market.
foreign direct investment (FDI)
1. Direct investment in developing countries
Can bypass the tariff barriers of the host country; At the same time, assets such as technology can get all the benefits.
2. Cross-direct investment between developed countries
Oligopoly reaction is a comprehensive performance of establishing enterprises on competitors' sites, restraining each other and strengthening their own abilities and behaviors. Supplement of Monopoly Advantage of Multinational Corporations
1, knowledge advantage
2. Advantages of product differentiation
3. Scale advantage
4. Management advantages
5. Capital advantage
Extension of monopoly advantage theory
Harmo's monopoly advantage theory laid the foundation for the development of overseas direct investment theory. In order to make this theory better adapt to the real economic society, western scholars have supplemented and perfected it in many aspects: first, they have further discussed the theories of various monopoly advantages of multinational corporations; The second is to demonstrate the basis and conditions for multinational companies to choose direct investment in export, direct investment and licensing trade; Thirdly, different explanations are put forward for the reasons of transnational corporations' overseas direct investment.