Transnational Corporations FDI Advantage In Integrating Factors By Merger And Acquisition

In the recent fifteen years, cross-border merger and acquisition(M&A) has become a main pattern of foreign direct investment(FDI) of transnational corporations(TNCs). It has also become a principal power of promoting TNCs' FDI. Based on reassessing Dunning's OLI paradigm as a current FDI theory, this paper transferred it into T-OLI four-advantage model by introducing a new variable "transaction integration advantage (T)". So the theory of "transaction integration advantage" based on M&A in TNCs' FDI was put forward. That means TNCs have the ability to attain dynamic competitive advantage across time and location by the transaction of "comprehensive resources and factors". Then the cross-border M&A is a substitute for green-land FDI but also a high-level integration advantage of factors transaction for TNCs.Based on "transaction" analysis of transaction cost economics, this article returned to "transaction" analysis in itself from the analysis of contract and organizational structure in the transaction cost economics. Combined with the transaction of "comprehensive resources and factors" by M&A in TNCs' FDI, the comparative static analysis on firm structure in transaction cost economics was changed and applied to the dynamic analysis on the competitive advantage of TNCs. The dichotomy of institutional and technological structure about firm production was developed by introducing "location advantage" variable in order to investigate the effect of the transaction of "comprehensive resources and factors" on the OLI advantage of TNCs. At the same time, with Porter's "diamond assessing model" and relative theories of modern economics, this paper analyzed the integration advantage of factors transaction along the main line of cross-border M&A - the transaction of "comprehensive resources and factors" - M&A and the reverse - transaction integration advantage - transaction integration mechanism - transaction integration efficiency - deepening transaction integration advantage. That explained the inherent mechanism of transaction integration advantage affecting competitive advantage of TNCs. So a new theory was put forward to interpret the new trends of TNCs including cross-border M&A. Based on this, an applied study was made on emerging TNCs' FDI from China and other developing countries. There are three parts in this paper.First, this paper introduced important functions of TNCs in developing global economy and important functions of cross-border M&A in promoting TNCs. Also, the paper introduced and assessed the western scholars' studies on cross-border M&A from academic traditions of firm theories and OLI paradigm as the main FDI theory. And the development of OLI paradigm was reviewed and assessed too.Secondly, analyzed in the pattern of transaction, cross-border M&A was defined as integration advantage of "comprehensive resources and factors" transaction. And it was developed into M&A(internalization advantage) and the reverse(externalization advantage).This gave the "0" "L" "I" new meanings in OLI paradigm. All this proved that TNCs can break the constraints of transactionability, time and location and integrate OLI. Compared with OLI paradigm, "T" advantage gave OLI new meanings.( i ) To some degree the constraint of transactionability is broken and some "O" factors can be traded by being mixed with "comprehensive resources andfactors" in the market of property rights. So OLI paradigm can explain "powerful to powerless" M&A , "powerful and powerful" M&A by co-internalization and "focusation". (ii) Developed into internalization and externalization, "I" advantage is an dual-direction and dynamic advantage. TNCs can apply direct link of property right and the reverse by internalization and externalization. Also, By "T" advantage, TNCs can transform one to the other between them, (iii) By "T" advantage, TNCs can keep the dynamic geographical border of suppositional firm cluster in order to change the geographical distribution of resources and factors such as "O". TNCs can acquire the ability to allocate and int...