1. Theories of FDI Agarwal(1980): 1.Theories assuming perfect markets 2.Theories assuming imperfect markets 3.Other theories 4.Theories based on other variables

2. Theories assuming perfect markets 1.The differential rates of return hypothesis 2.The portfolio diversification hypothesis 3.The market size hypothesis

3. Theories assuming imperfect markets 1.The industrial organization hypothesis 2.The internalization hypothesis 3.The location hypothesis 4.The eclectic theory 5.The product life cycle hypothesis 6.The oligopolistic reactions hypothesis

4. Other theories 1.The internal financing hypothesis 2.The currency areas hypothesis (the effect of the exchange rate) 3.The hypothesis of diversification with barriers to international capital flows 4.The Kojima hypothesis

5. Theories based on other variables 1.Political risk 2.Country risk 3.Tax policies 4.Trade barriers 5.Government regulations 6.Stragegic and long-term factors

6. The differential rates of return hypothesis 1.定義:from low rate of return to high rate of return (mr=mc) 2.條件：risk neutrality (substitute) 3.實證：not support (measures); observation different 4.質疑: other reasons ;capital or physical capital (ex. Human)

7. The portfolio diversification hypothesis 1:定義: rate of return and risk (diversification) 2:實證: weak support (measure problem-ante or post, report or actual) 3:優缺點: (1)generalized (2)plasusible explanation (3) include risk (1)why FDI (2)FDI or portfolio investment

8. The market size hypothesis 1:定義：the volume of FDI in a host country depends on its market size (sales: economies of scale) 2:理論:neoclassical domestic investment theory 3:實證: supported 4:疑問: measures problem

9. The industrial Organization hypothesis 1:定義:firm-specific advantages > disadvantages Lall and Streeten (1977) (intangible assets difficult to sell) (1)Capital (2)management (3)technology(4)Marketing (5)access to raw materials(6) Economies of scale(7) bargaining and political power 優點:explain why firms invest in foreign country 缺點:why choose A not B

10. The internalization hypothesis 1:定義: from market transactions to internal transactions (mr = mc) 2:原因:market failure or imperfection or inefficiency 3:優點: time lags, bargaining, uncertainty and cost 4:缺點: no empirical evident hyp cannot test directly

11. The location Hypothesis 原因: factors immobility (e.g. labor or material) 實證:+ /- (incidence or severity/ union)

12. The eclectic theory Dunning= O+L+I Conditions: ownership, Internalization, location advantages If ownership no Internalization==license if ownership, Internalization no location= export If ownership, Internalization, location = FDI

13. The production life cycle hypothesis 3 stages: initial production, maturity, standardization (products innovation, export, FDI) 問題:USA no longer products innovator

14. The Oligopolistic reactions hypothesis 原因: maintain market shares, status quo, equilibrium 問題:why initial investment

15. The internal financing hypothesis 意義:the utilizaiton of profit generated by a subsidiary to finance the expansion of FDI by an MNC in the country where the subsidiary operates. (internal financing < external) 理由:1) capital market restriction, 2)inefficiency 實證: support / not support

16. The currency areas hypothesis 意義:strong currency country tend to invest abroad, sources of FDI weak currency country recipients of FDI The real exchange rate 升值: 不利出口, FDI 取代出口 貶值: 資產具吸引力(e.g. USA)

17. The Hyp of diversification 1: barrier or cost 2: MNC opportunity

18. The Kojima Hyp 1:trade-orientated 2:anti-trade-orientated