| In this dissertation, the approach of spatial economy and location analysis, which is neglected for a long time by the mainstream economics, is taken to analyze the general incentives of FDI. It is argued that, FDI is the relocation of the firms by the nature. FDI happens, because all the specific locations of firms at a given period of time are maximally suitable for the internal resources of the firms at the period and the corresponding external resources they could take use of and it could not be a permanent "optimal" location. So the location should adjust as time goes on, and, when it relocates in foreign countries, FDI occurs.In the approach of classic economics, especially in the Arrow-Debreu System, which is the classic model of neoclassic economics, space was neglected totally. The classic economics studies the principles of economic activities in a "spot", which is criticized in this dissertation. The author argued that all of economic activities occur in a specific space. In the research of FDI, if we ignore the space factor and assumed that economic activities occur in a "spot", then there would be no "foreign" direct investment at all. So it is suggested that all the research of FDI should be taken in a platform of "space".Firms are studied in a geographical space in this paper. It is argued that location is important, because space costs could not be neglected. Space costs are defined as all the costs related directly to space, which have direct relationship with the activities of firms, and it includes transportation cost, time cost to cover the distance, and the extra information costs. Because space costs are important, the locations influence the efficiency of firms. Since the entire internal and external environment is changing continuously, there would not be a permanent optimal location. Firm should adjust its location according to the changing internal and external environment. Therefore, the locations and relocations of firms mirror the spatial activities of the firms that are adapting to the internal and external management environment.A general mechanic model of relocations of firm is created in the dissertation. It is argued that internal and extremely power would "destroy" the location equilibrium of firms, but "path dependence " and "location linked" powers would counteract it. So the two kinds of powers determine whether the firm relocates or not. The internal unequilibrium means that the development of the firm will "destroy" the original location equilibrium and force the firm to relocate. In other words, the development of firms would destroy their own location. The external unequilibrium means that some external environment such as natural resources, labor, and policies would "destroy" the original location equilibrium. As all the internal and external powers that make the firms relocate are stronger than the "location linked" power, firms relocate, and FDI may occur. The powers that make the firms relocate or "linked" are analyzed, and it is suggested that industrial factor is the most important causes. Different industrials factors have different principles of location and relocation. It is argued that some industry (such as food and beverage industry) is more active in relocating and spreading in space than some others (such as motor industry). Thus, the phenomenon, that the TNI of transnational corporation is not directly related to the firm scale but related to the industry, is explained.It is argued that, FDI is a natural outcome of the development and spreading of firms. No home country characteristic is assumed ahead of time in the dissertation. The firms are only studied as a "creature" in a "Environment System", which is changing and in which firms are developing, being influenced and influencing the others. So the solutions of the dissertation may have a general sense.The innovations of the dissertation are as follows: (1) It argued that the relocations of firms mirror the spatial adaptation of the firms to the management env...
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