The Application And Limitation Of Investment Development Path

This paper explores the characteristics of China's investment development path based on the IDP theory of Dunning and the related data of China's GDP as well as inward and outward FDI.According to the evidence from China,the variables that may improve the investment development path theory are introduced.The factors which can affect China's investment position and changes in each stage are also explained using the eclectic theory.After analyzing the GDP and net outward investment(NOI)data in China,it is believed that China is at the end of Stage 2 of IDP which has lagged behind the position that its GDP would justify.The reason can be explained as the influence from globalization,policy and political system,the huge domestic market,lack of firm-specific ownership advantage and etc.The IDP theory can be well applied to China in spite of the imbalance between GDP and FDI.In the first two stages of IDP,the location-specific advantage has been improved.The motives of investment in China from foreign investors changed from natural resource-seeking to market-seeking.Meanwhile,the natural resource remains to be an attraction to China's investment abroad,but China's outward FDI in the efficiency-seeking and even strategic asset-seeking in developed countries also occurred in Stage 2.The sustainable ownership-specific advantages of Chinese enterprises are quite essential for China's entering into the third stage of IDP,which is determined by its own resource endowments,size of market,the industry clusters and the role of government.The research of the evidence in China as well as the IDP theory demonstrates the Chinese investment developmental path,the changes of OLI advantages and the differences of investment motives in each stage.The kind of policy in support of China's moving to Stage 3 is predicted and the changes in the characteristics of inward and outward FDI are described.All the research may give guidance for the future policy targeted at motivating FDI.