Transnational corporations (TNCs) have turned to be the most active and important power to promote economic globalization since the nineties of twentieth century; TNCs have extended the scales of international trade, international investment and international production at unprecedented speed worldwide. But academic studies on TNCs have not catch up with the practice of multinationalization, as many researchers have focused on this issue. In China, all of practical activities and academic studies are in infant stage. It is vital to cultivate Chinese TNCs to improve our economic competition and status internationally. Research in this study field is of great significance both in theory and practice.The theory of the internalization based on the monopoly advantages of firms and market failure is the main stream of the western theories about transnational corporations. The exploiting of the Internalization incentive advantage needs to be designed and organized scientifically, and my paper is aimed at the study of this field,the main points and innovative ideas are as follows:Based on the new trends of the directions of investment flows, R&D activities, production and trade of transnational corporations, the author studied the Vernon's product cycle model. Demand of consumers and advantages of enterprises are jointly analyzed, further the impacts of ownership advantages of firms and location advantages of host countries on the foreign investment are studied dynamically. The limitations of Vernon's model are explained. And the author gives a new explanation to the new trends of foreign investment of TNCs. The prerequisite of using ownership advantages internally is to establish internal organizational framework suitable to its global strategy. The organizational structure should be designed dynamically and be optimized frequently so that it can be used to resolve the conflict between parent company and divisions on the issue of the degree of power concentration and therefore to achieve the global objectives. In this paper the author proposed that trust-agency theory should be applied in TNCs' internal organization control system, a model of agency agreement between parent company and its division is established. According to new trends the author probes into two kinds of the methods of transfer pricing. Cost based transfer pricing jointly uses company theory and market theory and its key determinant is marginal cost, adapting this method, any affiliate can gain maximized profit. The other method called negotiating based transfer pricing makes relative divisions share the profit and cost caused by intermediates. And division will share the profit of the parent company. Both of the methods have advantages and disadvantages, we should make sure which is more important between risk-sharing and investment encouraging when we make choice, uncertainty of internal trade also has influence on transfer pricing. In this paper, the causes, decision making process and styles of technology spillover of TNCs are analyzed, the author explains why multinationals mainly transfer their technology internally, and why they extend their R&D activities internationally, and what should be mentioned is that merge and acquisition is an ease way for transnational corporations to increase their technology advantage. |