| The paper analyses the theory of externalization from a systems’point of view, including the meaning of externalization, characteristics and its influence on overseas investments. Considering the political preference of host country, this dissertation was focused on the problems of sovereign wealth funds foreign investment and seeking a resolution. The behavior of pursue benefit maximization will lead to the damage of the social welfare and reduce the resource allocation efficiency When there are externalizations. When the host country has political bias to sovereign states, the investment barriers will be more difficult to break through. Seeking effective path to reduce externalization and political bias of investment become the main content in the paper.First of all, this paper introduced the theory and knowledge about externalization, political preferences and sovereign wealth funds, and analyzed the difficult position of sovereign wealth funds and affecting factors.Secondly, based on the model of protection for sale, this paper introduced investment externalization and the host nation political bias in model to study the influence mechanism on overseas investment. The factors of degree of externalizations, money demand how to effects the foreign policy for the host country also became the point of this thesis. The conclusion shows that the host country financial protectionism and political bias caused by the investment revealed the government’s trade off between the interest-group and political interests of themselves. The greater the externalization of investment and capital elastic demand, the bigger the investment barriers. The obvious role of political bias is in the negative externalizations strong industry. Therefore, in order to overcome the investment barriers of host country, the investor must consider investing in the industry which the potential negative externalization is small and deliver more value to reduce political bias. At the same time, investor should make good use of the reasonable opportunity to seek a higher return on investment.Thirdly, based on the above theoretical analysis, constructs the econometric model. According to the data of sovereign wealth funds in the U.S. market form2009to2011, we did empirical analysis according to sectors. The studies have shown that the greater the potential negative externalizations in SWFs investment industry, the bigger the role of the political preferences and vice verse. The scale and value of the invested company are less likely to SWFs investment. Investment industry and amount is mainly affected by the bilateral political relations and the demand elasticity of money.Finally, based on the preceding analysis introduce institutional arrangements for sovereign wealth funds in avoiding externalizations and political bias of the policy recommendations. |
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