Observing globalization of Chinese enterprises from theoretic perspective


Under the general trend of economic globalization, resources, commodities, capital and talents all flow around the world. China must also take the world market as its center stage and create a batch of its own large transnational companies; only in this way can it have its foothold and development in global competition.
About the driving influence of foreign direct investment to a country’s economy, there are four kind of modern western international investment classical theories, namely: Monopolistic Advantage Theory(S H Hymer, 1960s), Products Life Cycle Theory (Raymand Vernon), The Theory of Internalization of Market (P J Buckley and M Casson 1976) and The Eclectic Paradigm of International Production (J H Dunning 1977). In explaining a country’s foreign investment motive, prerequisite, etc., these theories place extra emphasis in some ways, but these theories thought that the capital movement between nations - foreign direct investment, may bring the host country and the investment nation benefit. Thus the benefit mechanism exists between the bilateral countries was promulgated, this has provided the theory basis for various countries' formulation about foreign direct investment policy.
On explanation of international capital migration motive, above four kinds of theory are not the same, but actually has one point in convergence, that is: the international capital migration is mainly flow from the high income, high deposits developed countries to the deposit and fund shortage developing countries. Regarding direct investment, this point has its limitations. Actually, the international direct investment is mainly because the investing country has certain comparison superiority element of production to the host country, but is not only or is not mainly the absolute monetization capital superiority.
When speaking of comparison superiority, it is not only possessed by the developed countries, but also possessed by certain industry or enterprise in developing countries. Different enterprises in different countries possibly each has its strong points. World economic development's imbalance, had decided the different country's growth of the market degree's disproportionality. The different country's enterprise entered the different host country market makes the enterprise’s comparison superiority obvious. Therefore the economic basis of a country, including developing country, to carry on foreign direct investment is that it has comparison superiority in economic development.
The reason that the above foreign direct investment's classical theory had not explained that the relative backward developing country may also carry out the foreign investment, is mainly because the above theories embark the research from the developed country standpoint. Therefore, the traditional viewpoint of believing that China do not have necessary fund to carry on foreign direct investment is untenable. Actually, the majority of large-scale development foreign direct investment countries have more or less the problem of money tightness. The capital they output in the overseas direct investment is by no means “absolutely surplus capital”, basically is “the relatively surplus capital”. The world circulation of capital already from past one-way flow developed to the two-way flow.
In 1978, Professor Kiyoshi Kojima brought forth the advanced Theory of Comparative Superiority Investment, also called Theory of Marginal Industrial Expansion. The theory indicated that the FDI is carried out from the relatively disadvantage industries (Marginal Industry) in a certain country. Its analysis object is the enterprise which invests outward from Japan.
In 1980s, Along with the multinational corporation's rising in developing countries, scholars began to probe the theory of competitive advantage in these corporations, this including Louis T. Wells’ theory of Small Scale Manufacturing as a Competitive Advantage, and Sanjaya Lall’s State on Localized Technological Capacities. These theories are suitable to explain emerging countries’ foreign investment at that time.
Economic globalization fundamentally changed the modern enterprises survival and development mode. The global competition already turned to be the basic environment for modern enterprises. Under the economic globalization condition, the foreign direct investment no longer take monopolistic superiority as the precondition, the enterprise has the partial competitive advantage is possible to form the new competitive advantage through the foreign direct investment. The developing country enterprises’ partial competitive advantage supports it with difficulty in the domestic market during long-term competition. They must gain creative property through the foreign direct investment, and through the comprehensive promotion of enterprises’ core competitiveness. The industrial globalization has provided the rare opportunity for the developing country’s enterprises to development, but if they want to survive in the globalization tide, they must realize the internationalization.
Although the competitive advantage is different from the developed country’s multinational corporations, along with the internationalization degree's enhancement, the corporations in China will inevitably face competition with the developed country’s multinational corporations, and will realize the competitive advantage’s promotion and replacement gradually.
Many factors cause conflicts between the parent firm and the host country. Nationalistic self-interest may overshadow the benefits obtained through cooperation. Similarly, sociocultural differences can lead to a total breakdown in communication and subsequent misunderstandings. Also, a large multinational firm may have such overpowering economic effects on a small host country that feels overwhelmed. Some international corporations have been charged with making excessive profits, hiring the best local people away from local firms, and operating contrary to social customs. International corporations must develop social and diplomatic skills in their managers to prevent such conflicts and to resolve those that unavoidably occur.
It is crucial to study international management and development of China corporations operating in oversea investments. The topic is concerned with managerial issues related to the flow of people, goods, and money, with the ultimate aim of managing better in situations that involve crossing national boundaries. Managers involved in international business have to interact with employees who have different educational and cultural backgrounds and value systems; they also must cope with different legal, political, and economic factors.