On FDI And Competence

The existing competence theories, which interpret sources of competence of a firm by the given four factors- including the resources, abilities, knowledge and environments, is tentative, static and linear. Since the existing theories bear such defects, this paper advances a new theory, Dynamic Cycling Theory of Competence, in Chapter I in the light of Marxist dialectical point of view. According to this theory, factors of competence are not constant but variable that can be adjusted and rearranged in the conscious investment of a firm, and investment refers to such behaviors that repeatedly arrange and rearrange the factors of competence in recycle of production of a firm. Thus, FDI, as one kind of such behavior, can and should be derived into the study of competence of a firm.Chapter II theoretically analyzes the relationship between FDI and competence. This chapter puts forward that FDI provides new sources for competence in many aspects and FDI consequently brings effect of competence reinforcement. However, a firm is bound to be faced with a variety of barriers during the process of FDI and to surmount these barriers presupposes certain competence. Chapter III and Chapter IV discuss respectively the influence of FDI on competence from the perspective of the choices of Value Chain and entry mode. Chapter V interprets the booming FDI of Chinese firms on the basis of the theory of competence of a firm.