Abstract: In order to better attract and utilize foreign capital, non-linear programming was used to investigate the action mechanism of international direct investment and its properties from the viewpoint of labor and specialization divisions. It was pointed out that international direct investment is not always favorable for the economic development of an invested country, and improving the transaction efficiency related to institution plays an important role in attracting foreign capital. Moreover, to an underdeveloped region, to invest foreign capital in the infrastructure that can improve transaction efficiency, instead of other industries, is more helpful for its economic development.