Research On Alternative Relations Between International Outsourcing And Foreign Direct Investment

The development of International Outsourcing and Foreign Direct Investment are the results of the world division of labor. Their effects on each country are still focus on the economics study. Based on the theory, this paper aims to analyze the alternative relations between International Outsourcing and Foreign Direct Investment.Upon International trade theory, New Institutional Economics Theory, Strategic management theory and Game Theory, the paper demonstrates the theoretical foundation of International Outsourcing. And the Specific Advantages Theory, Product Life Cycle Theory, Internalization Theory, Eclectic Theory of International Production and Marginal industrial expansion theory, the paper illustrates the theory foundation of Foreign Direct Investment. The paper also states the real economic factors for enterprises to adopt International Outsourcing,and the Cause reality for the host country to absorb Foreign Direct Investment.Upon above, the paper Comparatively analyses the economics effects on the host country between International Outsourcing and Foreign Direct Investment, the possible alternative relations have been expounded here. In succession, by establishing a normative theory model, the paper illustrates the factors, which influence multinationals when they need to make international selection, and multinationals make the best choice between International Outsourcing and Foreign Direct Investment. Through the co integration test on the Chinese economic data, the paper demonstrates the existence of alternative relations.