1, monopoly advantage theory
This theory was first put forward by American scholars C.P.Kindleberger and S.A. Harmo. The so-called monopoly advantage refers to the "exclusive advantage of production factors" owned by multinational companies, including high capital intensity, advanced technology, strong ability to develop new products, perfect sales system and scientific management methods.
They believe that the answer to why a country wants to invest abroad should be found from the form of industrial organization and the monopoly advantage owned by multinational companies. They pointed out that a company invests overseas because these companies have monopoly advantages in technology, patents, capital and management, and these advantages can be transferred abroad through industrial organizations without being mastered by local competitors. Therefore, although these companies are at a disadvantage in terms of transportation and communication costs and their understanding of the local legal and economic environment in the competition with local enterprises, the monopoly advantage can completely offset these disadvantages, so that multinational companies can obtain higher returns from overseas investment than domestic investment. Kindleberger also believes that most of these dominant enterprises are oligopolistic enterprises, which can exert economies of scale in their production and marketing both at home and in the world.
Their theory was later developed and perfected by many scholars from different angles. For example, S. Hirseh emphasizes the cost reduction of direct investment from the model economic benefits of production and scientific research and development; D.M.Shapiro, after studying the foreign investment in Canada, concluded that large high-tech enterprises are more capable of entering or exiting a certain industry than ordinary enterprises, and their capital mobility is stronger and more flexible. Therefore, they have the ability to invest in suitable places without national boundaries; P.R.Krugman and R.E.Caves observed that direct investment is usually divided into two categories, one is parallel investment and the other is "vertical investment". They demonstrated that vertical investment is the result of integrating the whole production process, avoiding price distortion and supply fluctuation of upstream products or raw materials, setting up overseas branches to ensure supply, reducing costs and increasing monopoly power.
2. Market internalization theory
Another investment theory based on industrial organization theory is the market internalization theory or market imperfection theory of P.J.Buekley and M.C.Casson. The so-called market internalization mainly refers to establishing the market within the company and replacing the external market with the internal market. The starting point of this theory is to explore the incompleteness of the external market, and explain the decisive factors of foreign direct investment from the relationship between this incompleteness and the allocation of its internal resources by multinational companies.
According to this theory, due to the incompleteness of the external market, if the semi-finished products, technology, marketing know-how, management experience, personnel training and other "intermediate products" owned by enterprises are traded through the external market, it cannot be guaranteed that enterprises can maximize profits. Only by using foreign direct investment, enterprises can establish production and business entities in a wider scope, form their own integration space and internal exchange system, and transform open external market transactions into internal market transactions, can the contradiction between internal resource allocation efficiency and external market be solved. This is because internalizing transactions will minimize transaction costs. In the internal market, buyers and sellers have an accurate understanding of product quality and pricing, and information, knowledge and technology can be fully utilized, thus reducing trade risks and maximizing profits.
According to this theory, the incompleteness of the external market is reflected in many aspects, including: (1) the existence of monopoly buyers makes bargaining difficult; (2) Lack of forward hedging market to avoid the risk of enterprise development; (3) There is no intermediate product market with different pricing according to different regions and different consumers; (4) The information is invalid; (5) government intervention, etc. In order to reduce the influence of these imperfect markets, and make the advantages owned by enterprises and the intermediate products produced have ideal returns, enterprises generally invest overseas.
The theory further points out that whether the market can be internalized ultimately depends on the following four factors: industry-specific factors (product nature, external market structure and economies of scale, etc. ), regional unique factors (geographical distance, cultural differences, social characteristics, etc. ), country factors (national political system, financial system, etc. ) and company-specific factors (internal market management capabilities of different enterprise organizations, etc. One of the most critical factors is industry-specific factors.
This theory is a powerful measure to deal with market incompleteness. It explains that multinational companies established through direct investment can gain the advantages of internalization-reducing transaction costs and reducing risks. It also explains the various forms of post-war foreign direct investment to a certain extent or within a certain scope, including the formation and development of transnational service industries, such as transnational banks. However, this theory is only a micro-analysis, which does not analyze the international production and division of labor of multinational companies from the perspective of world economic integration, and also ignores industrial organizations and investment places.
3. Product cycle theory
Another international investment theory related to industrial organization theory is R. Vernon's "product cycle theory". Vernon believes that the development law of enterprise product production cycle determines that enterprises need to occupy overseas markets and invest abroad. He pointed out that products have their own characteristics at every stage of their life cycle. In the stage of product innovation, innovative countries have advantages, and the general domestic market demand is large. At this time, the most favorable thing is to arrange domestic production, and foreign demand can be met through export. After the product enters the mature stage, the product performance is stable, the foreign market is expanding day by day, the consumer price elasticity is increasing, and it is urgent to reduce the cost. If the marginal cost of domestic production plus transportation cost exceeds the average cost of foreign production, and if there are differences in labor prices abroad, then foreign production is more favorable. And at this stage, foreign competitors will also appear, because with the export of products, technology will gradually leak out, and then there will be the danger of losing the technological advantages of innovative products. In order to maintain the market and prevent overseas competition, it is necessary to establish branches abroad. At this stage, investment targets are often countries with similar needs and little difference in technical level. When products finally enter the standardization stage, production has been standardized, price competition has become the main aspect, and the relative advantage is no longer technology, but labor. In order to gain competitive advantage, enterprises have accelerated the pace of foreign direct investment and set up subsidiaries or other branches in countries or regions with lower production costs.
4. Technology cycle theory
Another scholar, S.P.Masee, put forward a "technology cycle theory" similar to Vernon's theory from the perspective of technology and information rent-seeking. He believes that enterprises spend huge sums of money to create technology and "information" in an attempt to produce and sell related products through these technologies and information in order to obtain monopoly rents. However, the patent protection is not perfect, and it is difficult for them to achieve the purpose of rent-seeking in China. Enterprises will export their capital to countries that they think can provide additional patent protection under the motivation of rent-seeking. Markey pointed out that multinational companies specialize in producing technical information suitable for internal transfer and will specialize in producing complex technologies to ensure that they possess these technologies and get the rent they deserve. He also believes that technology will become less and less important after mass production of new products. To this end, he put forward the concept of "industrial technology cycle".
He believes that in the research and development stage, multinational companies tend to strictly control these technologies in their own countries and will not transfer them. In the practical stage, driven by the pursuit of rent maximization, multinational companies will export their capital to set up branches overseas and transfer technology through these branches. With the increase of overseas investment and the expansion of production scale of multinational companies, their technology cycle has reached a mature stage. At this time, the scale of overseas investment of multinational companies will gradually shrink with the outdated technology.
All the above international investment theories related to industrial organization theory have a common feature, that is, based on industrial organization, analyzing the influence of monopoly advantage on multinational companies' overseas investment from the perspective of industrial organization behavior. The theory of monopoly advantage focuses on the restrictive influence of the general monopoly advantage of multinational corporations, emphasizing that this advantage is from the perspective of industrial organization rather than national advantage, and correctly points out the main role of multinational corporations in international direct investment. The theory of market internalization or market imperfection emphasizes the motivation of minimizing the production cost of multinational companies, which is also correct, because minimizing the cost means maximizing the profit. Product cycle theory focuses on how multinational companies strive for the most favorable production conditions at different stages of product development, maintain their monopoly advantage and its impact on international investment. Generally speaking, the same is true.
The technology cycle theory emphasizes the impact of the rent-seeking motivation of multinational companies to create new technologies on overseas investment, and its argument is similar to the product cycle theory. As far as multinational companies are mostly large companies with technological development advantages, this theory also has its unique role. However, all the above theories have a defect, that is, they confuse the internal motivation and external objective conditions of transnational corporations' foreign direct investment, and confuse the essence of transnational corporations' pursuit of monopoly high profits on a global scale and its difference from objective conditions such as global production and sales capacity. These theories can't explain the motives of overseas investment of some enterprises that don't have monopoly advantages such as technology, and the investment behavior of some countries in developing new products directly abroad. 1, eclecticism
Since the mid-1970s, there have been some new phenomena and characteristics in international investment: while developed countries continue to export a large amount of capital, some developing countries have also begun to invest directly abroad, and the balance of power is constantly changing. Especially after the first oil crisis, the overseas investment of oil exporting countries increased significantly. In view of these new phenomena, it is difficult to explain the international investment theory of industrial organization theory, which focuses on multinational companies in developed countries, and then a new theory needs to be born. J.H. Deng Ning's eclecticism theory is a representative theory that appeared at this time.
Downing tried to combine the theory of international trade and industrial organization to analyze international investment. According to him, "it is called' eclectic international investment theory' because;
(1) This theory absorbs the main theories that explain international investment in recent 20 years;
(2) Applicable to all types of foreign direct investment;
(3) Perhaps the most interesting thing is that it includes three main forms for enterprises to go international, namely, direct investment, commodity export and contractual resource transfer, and suggests what methods enterprises should adopt under what circumstances. "
The main points of Downing Theory are:
(1) Firstly, the necessary and sufficient conditions for enterprises to invest abroad are analyzed.
The theory points out that there are three forms for a country's enterprises to engage in international economic activities: direct investment, export trade and technology transfer. Direct investment will inevitably lead to an increase in costs and risks. Multinational companies are willing and able to develop overseas direct investment because they have three comparative advantages: ownership-specific advantages, the ability to internalize ownership-specific advantages and location-specific advantages that local competitors do not have. The first two are the necessary conditions for foreign direct investment, and the latter is the sufficient condition. These three advantages and their combination determine which activity form enterprises choose in economic activities.
If a company monopolizes the specific advantages of ownership, it can only choose the technology transfer scheme to carry out international economic activities; If you have specific ownership advantages and internalization advantages, you can export; If these three advantages are available, you can make foreign direct investment.
(2) It further points out the main contents of specific advantages of ownership. Including: ① technological advantages, including technology, information, knowledge and tangible capital; (2) Enterprise scale advantages, including monopoly advantages and economies of scale advantages; ③ organizational and management advantages; (4) Capital advantage (including currency).
(3) Point out the content of location advantage. Including: ① labor cost; ② Market demand; ③ Tariff and non-tariff barriers; 4 government policies, etc.
Downing's theory focuses on the conditions of direct investment, which is correct in terms of the international investment conditions constituted by these advantages. It can explain the phenomenon of international direct investment in different countries and has important reference value for enterprises to choose different international development strategies. However, this theory attributes all international investment to three leading factors, which are inevitable absolute factors. Some types of enterprises, such as service enterprises, have no obvious regional advantages in investing overseas. The reason why they invest overseas is that the services they provide must be decided in the same place as consumers.
2. Diversified risk theory
Another theory about investment conditions developed in the mid-1970s is "risk diversification theory". Its early representatives are R.E.Caves and G.V.Stevens, who believe that the diversification of foreign direct investment is the result of risk dispersion based on markowitz's portfolio theory, so the foundation of portfolio theory is also the foundation of this theory. Kevis believes that horizontal investment in direct investment reduces market uncertainty and reduces the risk of single product structure through product diversification; Vertical investment is to avoid the uncertain risk of upstream products and raw material supply. Stevens believes that the principle of risk diversification of manufacturers is the same as that of individuals, and always requires minimizing risks under certain expected returns. But the investment conditions of individuals are different from those of enterprises. Individuals mainly invest in financial assets, while manufacturers invest in real estate and plant equipment in different countries and regions.
T. Agmon and D. Lessard, the later representatives of this theory, also believe that the foreign direct investment of multinational companies is an investment to spread risks on behalf of their shareholders, and the irrelevance of direct investment income in different countries and regions provides a good way for individuals to spread risks, even a way that securities investment cannot provide, because the capital movement cost in the securities market is high and the system is imperfect. Another scholar, M. Adler, thinks that the restrictions on individual securities investment may not necessarily lead to foreign direct investment, because multinational companies directly make investment decisions on behalf of shareholders. Only when the foreign securities market is not perfect and cannot meet the needs of individual investment, the direct investment of multinational companies will be carried out. In this case, multinational companies play the role of financial intermediaries to spread risks.
Risk diversification theory links securities investment with direct investment, and regards the imperfection of securities market in developing countries as a factor of direct investment. It should be said that it has its correct side, which supplements the deficiency of previous investment theory from another angle. Since 1980s, with the gradual improvement of the securities market in developing countries, securities investment has gradually become the most important investment form. This proves that direct investment and securities investment are complementary. At present, China is making great efforts to improve the foreign investment environment and attract more foreign investment. However, we should not neglect the role of further developing and perfecting China's securities market, because according to the risk diversification theory, securities investment is the first investment form for foreign enterprises. With the continuous improvement of China's securities market, the foreign capital absorbed through this channel will definitely increase greatly. Great changes have taken place in the pattern of international investment since 1980s. The United States has gradually declined from the status of the largest capital exporter, and overseas investment in developed countries such as Japan and Germany has increased significantly. The United States has become the object of their competing investment, and by 1985, the United States has become the largest capital importer. At the same time, some newly industrialized countries began to invest abroad on a large scale. Corresponding to the change of international investment pattern, the international financial market plays an increasingly important role in international capital flow. Emerging international financial centers have emerged one after another and merged with the achievements of scientific and technological revolution, and new financing means and methods have emerged one after another. International syndicates and financial oligarchs have replaced industrial multinational companies as the dominant players in international investment. All these put forward new challenges to the previous international investment theory. Therefore, studying and analyzing the international investment theory from the financial perspective has become the common feature of the new investment theory since the 1980s.
1, currency exchange rate theory
R. Alibaba's "currency exchange rate theory" is an investment theory put forward earlier from the financial point of view. In his view, all previous theories failed to answer why these enterprises have the advantage of acquiring foreign assets, nor did they provide any opinions on the investment pattern, that is, why some countries export capital and some countries import capital, let alone explain why the investment pattern has changed.
He pointed out that the American capital market had an advantage in the 1960s, which came from the preference of investors in the United States and other countries in the world to calculate debts in dollars, which reflected that the interest rate calculated in dollars was lower than other currencies after adjusting for expected exchange rate fluctuations. From this, we can draw the same conclusion, that is, investors will get the dividend income of 1 USD at a higher price, which in turn means that American companies can pay a higher price when buying foreign shares than companies in other countries. He believes that the upsurge of overseas investment in the United States throughout the 1960 s is the result of overvaluation of the US dollar. With the floating exchange rate in the 1970s, the dollar fell sharply, while the price of American stock market fell, while the price of foreign stock market rose. At this time, companies headquartered in Europe and Japan are willing to buy American companies at higher prices. Alibaba pointed out that the pattern of international investment can be measured by the fluctuation of market prices of enterprises headquartered in different countries. When the market price of the company where the headquarters is located falls, capital will flow in, and when the market price rises, capital will be exported. The changes in market prices of enterprises with different headquarters reflect the changes in nominal exchange rate and inflation rate. Therefore, he believes that hard currency countries will make direct investment in soft currency countries.
Alibaba's theory correctly analyzes the influence of exchange rate changes on international direct investment. He tries to explain the changes in international investment pattern and the relative shrinkage of American foreign investment with exchange rate. However, the exchange rate is the reflection of the real price change of currency and the change of international economic strength, not the reason for this change. So the influence of exchange rate on direct investment is only a phenomenon. The force that really leads to the change of international capital flow pattern and restricts international investment behavior is the change of the relative advantages and relative development speed of monopoly capital in various countries, and this change is the result of the unbalanced law of capitalist development.
2. International financial center theory
Another analysis of international investment theory from the financial point of view is "international financial centralization" proposed by H.C.Reed in 1980s. Reid believes that all previous international investment theories have neglected the role of international financial centers in determining the region, scale and pattern of international investment, and international financial centers are very important for international investment activities. They are not only international settlement centers, global securities investment management centers, communication exchange centers, multinational banking centers, but also international direct investment centers. Reid pointed out that what international companies pursue is not the maximization of income or the minimization of cost, but the optimization of operating efficiency, that is, the maximization of stock price and bond interest, which can enhance the competitiveness of enterprises in commodity markets and capital markets. The operating benefits of multinational corporations are evaluated by international financial centers, and the evaluation results are reflected by the price fluctuations of stocks and bonds issued by multinational corporations. International financial centers play a role in international direct investment by evaluating the capital ratio and business policies of multinational companies. For example, when an international financial center thinks that a company's loan ratio is too high and its overseas assets develop too fast, it will lower the market price of the company's securities, reduce the company's operating efficiency and the income of its shareholders and creditors, which actually means that the efficiency of the company's entire capital allocation may be very low. Therefore, this will force the company to adjust its investment strategy and management policies and shrink its overseas investment. If the company ignores the evaluation of the financial center, the financial center may further reduce the price of its securities, forcing the company to respond. In this way, international financial centers and financial monopoly capital such as big banks, insurance companies and mutual funds that dominate the financing activities of financial centers control international direct investment activities.
Reid's theory of international financial center correctly pointed out that the international financial oligarchs represented by international financial centers controlled and influenced the international capital flow in 1980s. It was these international monopoly consortia that manipulated the price of international securities market and the flow and direction of international capital, and pursued high monopoly profits on a global scale. However, although Reid correctly pointed out the influence of the international financial center, he failed to grasp its essence. Industrial capital and financial capital are not inseparable, they are dissolved together. Moreover, the error of this theoretical analysis is also obvious. It reverses the relationship between the rise and fall of enterprise securities prices and enterprise operating efficiency. It seems that the decline in economic benefits of enterprises is caused by the decline in securities prices of enterprises, but in fact, the decline in securities prices is only a reflection of poor management of enterprises. Although the monopoly capital of financial center can manipulate and influence the price of enterprise securities, this relationship will not be reversed, because monopoly capital will not and cannot maintain the securities of a poorly managed and unprofitable enterprise at a high price.
In addition, there are two important theories in 1980s, namely, Downing's investment development stage theory and intra-industry two-way investment theory.
3. Theory of investment development stages.
Tang Ning developed the eclecticism theory dynamically in 1982 and put forward the theory of investment development stages. The main points of this theory are:
(1) The investment flow of a country is closely related to its economic development level.
(2) Put forward the concept of foreign investment cycle. The theory divides the utilization of foreign capital and foreign investment into the following stages: ① there is little utilization of foreign capital and no foreign investment; ② The utilization of foreign capital increased and a small amount of foreign investment was made; ③ The utilization of foreign capital and foreign investment increased rapidly; (4) Foreign investment is roughly equal to or greater than the utilization of foreign capital. On this basis, Tang Ning believes that developed countries have roughly experienced these four stages, developing countries have entered the second stage from the first stage, and emerging industrial clusters such as Taiwan, Hong Kong, Macao and New Korea are rapidly moving from the second stage to the third stage or have entered the third stage.
(3) The development stage of investment is explained by dynamic international production synthesis theory or eclecticism theory, which proves that the international investment flow of a country is always closely related to the level of economic development.
This theory also holds that in the first stage of economic development, China has almost no specific ownership advantages and internalization advantages, and some of them are extremely fragile. Foreign location advantages cannot be utilized in China, and China's location advantages are harmful to foreign countries.
Investors are not attractive. So there is no capital output, only a small amount of capital inflows. In the second stage, the domestic market expanded, the purchasing power increased correspondingly, the market transaction cost also decreased, and the capital inflow began to increase. At this time, capital inflow (that is, the use of foreign capital) can be divided into two types, namely, import substitution and export-driven At this stage, introducing foreign capital is the key. Therefore, the state should create regional advantages, such as improving the investment environment, perfecting the legal system and unblocking professional channels. In the third stage, the domestic economic level has been greatly improved, and foreign investment is possible. Because the technology introduced in the previous stage has developed domestic resources, the specific advantages of ownership have been continuously enhanced, the advantages of foreign investors have disappeared relatively, and the location of foreign markets is also attractive. In the fourth stage, the economy has been quite developed or highly developed. Generally speaking, it has the advantages of specific ownership and internalization, and it can take advantage of the specific advantages of the location of other countries. At this time, the state actively carried out foreign direct investment.
It can be seen that this theory comes down in one continuous line with eclecticism, only making the latter dynamic. It expounds the correlation between direct investment and economic development from four dynamic stages, and expounds that a country can participate in foreign direct investment because it has the relative advantages of ownership, internalization and location and cooperates with it.
It should be pointed out that this theory has certain practical significance, which helps developing countries to make full use of foreign capital to create location conditions, and also helps developing countries to use their comparative advantages to make appropriate foreign investment and advance into the international market.
4. Intra-industry two-way investment theory.
The theory of intra-industry two-way investment is put forward according to the great changes of international capital flow in recent 20 years, especially the phenomenon that capital flows between developed countries and uses the same industry intensively. Economists have conducted extensive research on this and tried to explain this phenomenon. E.M. Graham pointed out that the reason why there will be two-way investment lies in the "similarity of industrial distribution of multinational companies", and similar things are easy to approach.
Tang Ning pointed out that two-way investment is mainly concentrated in technology-intensive sectors, while the proportion of investment in traditional sectors is not high. This is because: (1) The level of developed countries is similar, but no enterprise has an exclusive ownership advantage, while several enterprises can have almost similar ownership advantages. (2) In order to gain common advantages, benefit from economies of scale and lower costs in the host country, the company makes two-way investment. (3) Developed countries have similar income levels and similar demand structures, so the expansion of demand for heterogeneous products will lead to the tendency of intra-industry international trade among developed countries. Once intra-industry trade is blocked, the requirement of market internalization will lead to the emergence of two-way intra-industry investment.
Harmo and kindleberger also explained this phenomenon and put forward the theory of "oligopoly reaction behavior". They believe that in order to gain or maintain their position in international competition, oligarchs of various countries will occupy competitors' territory, that is, in the form of "oligopoly", and intra-industry direct investment is only an important means of this "oligopoly" competition.
In addition, the safe harbor theory that emerged in recent years can also explain the behavior of two-way investment. The core view of this theory is that although the investment income in developing countries is higher than that in developed countries, it is weak in security and legal protection, that is, it will bear great political and economic risks. Therefore, it is best to invest money in developed countries to obtain relatively stable income, while the internal conditions of the industry are similar, and the investment will be effective faster and profits will be obtained faster. It can be seen that the application of this theory can easily lead to the growth of two-way investment.