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Agglomeration Effects and Foreign Direct Investment Location Choice: Cross-country Evidence from Asia

Title
Agglomeration Effects and Foreign Direct Investment Location Choice: Cross-country Evidence from Asia
Authors
Choi, Paul Moon SubChung, Chune YoungLee, Kaun Y.Liu, Chang
Ewha Authors
최문섭
SCOPUS Author ID
최문섭scopus
Issue Date
2020
Journal Title
JOURNAL OF KOREA TRADE
ISSN
1229-828XJCR Link
Citation
JOURNAL OF KOREA TRADE vol. 24, no. 1, pp. 35 - 58
Keywords
Agglomeration EffectForeign Direct Investment
Publisher
KOREA TRADE RESEARCH ASSOC
Indexed
SSCI; SCOPUS; KCI WOS
Document Type
Article
Abstract
Purpose - This study examines the determinants of foreign direct investment (FDI) location choice for Chinese firms, focusing on the agglomeration effect for firms of the same nationality. Design/methodology - The empirical data are China's inward FDI from the top 19 economies (excluding tax havens and Taiwan) in terms of FDI during 1997-2015 and China's outward FDI from the top 18 economies (excluding tax havens). This study uses a random effects generalized least squares model for panel data analysis. Findings - The results confirm that both host countries' costs and market conditions and the degree of agglomeration affect these countries' attractiveness for FDI inflows. Specifically, agglomeration has a significant effect on China's inward and outward FDI. This study confirms that the agglomeration of firms of the same nationality has predictive power for multinational enterprises' FDI location choices. The host countries' real GDP and trade openness also positively affect FDI inflows. Interestingly, however, China's production cost has a positive effect. Thus, inward FDI aimed at entering the Chinese market is increasing in recent years relative to the previous efficiency-seeking FDI. Inward FDI in China is therefore the market-entry type, whereas outward FDI by Chinese firms is the market-oriented type. Originality/value - These results suggest that the effects of the potential determinants of Chinese outward FDI are similar to those of inward FDI as China's trade liberalization progresses.
DOI
10.35611/jkt.2020.24.1.35
Appears in Collections:
경영대학 > 경영학전공 > Journal papers
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