A Research On Linkage Effect Of FDI To Industries In Host Country

Since the 1980s, the scale of foreign direct investment has expanded swiftly with investment fields also broadened. FDI has strongly effect in china economic development. This paper mainly analyses how linkage of FDI effect the upstream and downstream in host country. First this paper introduces the conception and the form of expression, then analyses the reflection,characteristic and determinants of linkage effect After that we find it promotes the linkage jobs, technology transfer and specialization ,also has negative effect because of the down protected industries. We conclude that many factors effect linkage effect including the mode of MNC's entrance to down stream industry, channel choice of getting input , investment motives ,market strategies, policy of host country infrastructure, firm's scale in down stream industry ,production capacity etc. This paper also build the model to indicate that when FDI entry the down stream industry ,backwards linkage effect of FDI increase the local firms output and forward linkage of up stream industry promote industry development. Through the factor of the proceed section, we find that different factors change the extent of linkage effect and induce different development ending .Last, we use cases analysis when multinational automobile firms entry Chinese automobile manufacturing industry, how it effect Steel and Automobile industry, and to convince the findings in model. Before now we give the suggestions for policy design.