A Study On The Interactive Mechanism Between FDI Enterprises And Domestic Enterprises In China

As the foreign capital pouring into China, enterprises with foreign direct investment has gradually become an important economic force in domestic market. Foreign enterprises closely related and interacted with local enterprises in China. The historical process of world economic proves that foreign enterprises expand their industry chain and market share through the information dissemination and contract cooperation with local enterprises. The interaction between foreign and local enterprises includes a wide range context, including financial cooperation, production, marketing and talent. FDI enterprises can efficiently allocate resources, promote the development of local enterprises, and strengthen the interaction between FDI and domestic enterprises, which accord with the strategic intention of China. Therefore, the understanding of interactive mechanism of FDI and domestic enterprises and the thinking about how to promote the benign interaction between the two sides, can improve the development of both FDI and domestic enterprises, promote China's regional economy and significantly impact global trade relations.The development of FDI enterprises depends on resources provided by local enterprises, which can improve the added value chain to gain its location advantages in the global competition. Advanced technology and ideas of foreign-invested enterprises can promote the technical ability of local enterprises, strengthen the interaction between FDI enterprise and domestic enterprises, and drive the economic development of local area. Thus their beneficial interaction plays an important role in contemporary China's economy. Without the support from domestic enterprises, foreign enterprises cannot survive and gain global competitive advantage in local market. The advance technology and management experience of foreign enterprises promote local enterprises in the field of production, marketing, design, logistics and after-sales. Domestic enterprises with learning and imitation would gradually increase its competitive ability and narrow the gap with foreign enterprises, which may in return influence foreign enterprises. With the transformation of China's economic, there will be a grant number of foreign capital crowed into China. The interaction between foreign and local enterprises also will be more frequent and complicated. In addition, local enterprises gain its competition and more significantly adversely affect foreign enterprises. With the beneficial effect of spillover from FDI enterprises, local enterprises gain its innovative ability and core competition, narrow the technology gap with FDI enterprise. The relationship between foreign and domestic enterprises is mutual and constrained, this beneficial interaction can create a win-win results.In perspective of information dissemination and contract cooperation dimensions, we discuss the interactive mechanism of FDI and domestic enterprises. Then we theoretically and empirically analysis the two dimensional classifications, and discuss the characteristics and policies of each classifications. We introduce the research background, objectives, methodologies, framework, dissertation structure, and the innovative points of the dissertation. Based on literature review, this dissertation defines the relevant concepts, puts forward the influence of FDI enterprises to local enterprises, and the reaction of local companies to foreign enterprises. This research explains the interaction mechanism of foreign enterprises and local enterprises in domestic market. We focus on the new insight of information dissemination and contract cooperation to explore the interaction mechanism. Then this dissertation introduces the characteristics of the interactive relations between FDI and local enterprises. These characteristics are observed by the perspective of information dissemination and contractual cooperation. We first explain the development and present situation of enterprise, which includes internet accession, computer application, online operation, cloud management and data marketing. FDI enterprises establish joint venture with local firms. Foreign enterprises bring their advanced management experience, technology and information, contractual spirit, business ethics and corporate culture to local enterprises. The influences of FDI enterprises include recent foreign capital withdrawal. We outline the relevant theories of foreign direct investment, information dissemination and contractual cooperation.Based on those theories, this dissertation reveals the interactive mechanism between foreign and local enterprises. We focus on the two transmission routes, which respectively are information dissemination and contractual cooperation. From the perspective of information dissemination, the interaction includes imitation learning, technology spillovers, innovation diffusion, location selection and industrial agglomeration. Secondly, the existence of digital divide is the competitive advantage of foreign enterprises. Therefore, the information dissemination and convenient environment is one of the core factors of FDI enterprises'location selection. Secondly, in the sight of contractual cooperation, FDI enterprises pay attention to the contract spirit, integrity, open corporate culture; this may influence local enterprises in the process of contract cooperation. The consideration of cooperation can be summarized as demonstration effect and the joint effect, which includes recognition, Chinese shareholder opportunism behavior and previous investment risk. The route of interaction includes imitation learning, technology spillovers, innovation diffusion, location selection, industrial concentration, capital complementary and competition relations. FDI enterprises promote local firms'competitive advantage; local enterprises'cluster advantages in return attract foreign direct investment. Those relationships reveal the positive interaction between FDI and local enterprises. The last section divides the interactive relationship into four quadrants by two dimensions. We explain each quadrant's characteristics and interactive relationships.On the basis of theoretical analysis, thisdissertation focuses on empirical analysis of the interactive relationship between foreign and domestic enterprises. In empirical part, the dimension of information dissemination focuses on the relationship between the digital divide and foreign evacuation; the dimension of contractual cooperation stresses the influence factors of cooperation. In the end, this dissertation puts forward policy suggestions of interactive relationships and foreign direct investment. We analysis four quadrants and respectively make policy proposals. Lastly, we reveal research limitations and future research direction.According to empirical results, this dissertation draws the following conclusions:Firstly, the interaction between FDI and domestic enterprises have more than one path. From the perspective of information dissemination, the interactive paths include imitation learning, technology spillovers, innovation diffusion, location selection and industrial agglomeration. In the sight of contractual cooperation, those paths are location selection, industrial concentration, complementary capital, competitive cooperation. Local enterprises can learn form FDI enterprises though knowledge management, technology spillover, and knowledge sharing in the industrial cluster. it can promote local enterprises'learning ability and shorten the gap with FDI enterprises. Lately, local enterprises earn technical advantages which combines with local market experience, it can reversely spillover of FDI enterprises.Secondly, according to two dimensions of information dissemination and contractual cooperation, we the interactive relationship into four quadrants by those two dimensions. We explain each quadrant's characteristics and interactive relationships and put forward some policies.Thirdly, we use detailed statistical data, empirically explain the appearance and influence factors of interactive relationships. Those results show that information transmission can reduce digital divide, and shorten the technology gap between FDI and domestic enterprises, and promote local enterprises'competitive ability. In addition, the FDI enterprises'cooperation with local enterprises would consider two kinds of influencing factors:demonstration effect and joint effect.Based on the above conclusions, this dissertation puts forward the following suggestions:1. In the environment of high contractual cooperation and low information dissemination, government needs to provide beneficial supports of digital information for both FDI and local enterprises. Regional industry still have blank market opportunity. Promote the digital capability and try to attract foreign investment, which can help to grasp opportunities to fill the blank market.2. In the environment of high contractual cooperation and high information dissemination, government needs to construct public platform, build the bridge between FDI and local enterprises and make policies which can promote the their interactive relations.3. In the environment of low contractual cooperation and high information dissemination, government should perfect the institutional environment, legal environment and establish relevant contractual laws and regulations which can protect intellectual property rights.4. In the environment of low contractual cooperation and low information dissemination, government should focus on the efficiency of cooperation between FDI and local enterprises. Pay attention to the early stage of the cooperation of research evaluation, improve the supervision of contracts, which can help to strengthen connection and improve knowledge dissemination.