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Economic institutions and FDI location choice: Evidence from US multinationals in China

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  • Du, Julan
  • Lu, Yi
  • Tao, Zhigang

Abstract

This paper examines the impacts of economic institutions, including property rights protection and contract enforcement, on the location choice of foreign direct investment. From a data set of 6288 US multinationals investing in various China's regions for the period of 1993-2001, it is found that US multinationals prefer to invest in those regions that have better protection of intellectual property rights, lower degree of government intervention in business operations, lower level of government corruption, and better contract enforcement. Our results are robust to alternative measures of economic institutions, different sub-samples, and different estimation strategies, and to the inclusion of control variables such as those for agglomeration economies, and other traditional factors of FDI location choice. Journal of Comparative Economics 36 (3) (2008) 412-429.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Comparative Economics.

Volume (Year): 36 (2008)
Issue (Month): 3 (September)
Pages: 412-429

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Handle: RePEc:eee:jcecon:v:36:y:2008:i:3:p:412-429

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Web page: http://www.elsevier.com/locate/inca/622864

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Keywords: Economic institutions FDI location Property rights protection Contract enforcement Agglomeration;

References

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Citations

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Cited by:
  1. Rogers, Cynthia L. & Wu, Chen, 2012. "Employment by foreign firms in the U.S.: Do state incentives matter?," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 42(4), pages 664-680.
  2. Mina, Wasseem, 2012. "Beyond FDI: The Influence of Bilateral Investment Treaties on Debt," MPRA Paper 51920, University Library of Munich, Germany.
  3. Jie Wu & Xiaoyun Chen, 2012. "Leaders’ social ties, knowledge acquisition capability and firm competitive advantage," Asia Pacific Journal of Management, Springer, Springer, vol. 29(2), pages 331-350, June.
  4. Awokuse, Titus O. & Yin, Hong, 2010. "Intellectual property rights protection and the surge in FDI in China," Journal of Comparative Economics, Elsevier, Elsevier, vol. 38(2), pages 217-224, June.
  5. Mina, Wasseem, 2013. "Political Risk Guarantees and Capital Flows: The Role of Bilateral Investment Treaties," MPRA Paper 51811, University Library of Munich, Germany.
  6. Abigail S. Hornstein, 2009. "Where a contract is signed determines its value: Chinese provincial variation in utilized vs. contracted FDI flows," Wesleyan Economics Working Papers, Wesleyan University, Department of Economics 2009-006, Wesleyan University, Department of Economics.
  7. Bürker, Matthias & Franco, Chiara & Minerva, G. Alfredo, 2013. "Foreign ownership, firm performance, and the geography of civic capital," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 43(6), pages 964-984.
  8. Hornstein, Abigail S., 2014. "The impact of local governance institutions on foreign market listings: The case of Chinese firms," China Economic Review, Elsevier, Elsevier, vol. 29(C), pages 46-67.
  9. Yi, Lu & Zhigang, Tao, 2009. "Contract Enforcement and Family Control of Business: Evidence from China," MPRA Paper 18209, University Library of Munich, Germany.
  10. Du, Julan & Lu, Yi & Tao, Zhigang, 2012. "Institutions and FDI location choice: The role of cultural distances," Journal of Asian Economics, Elsevier, Elsevier, vol. 23(3), pages 210-223.
  11. Eric Fesselmeyer & Leonard J. Mirman & Marc Santugini, 2012. "Risk Sharing in an Asymmetric Environment," Cahiers de recherche, CIRPEE 1236, CIRPEE.
  12. Yi, Jingtao & Wang, Chengqi & Kafouros, Mario, 2013. "The effects of innovative capabilities on exporting: Do institutional forces matter?," International Business Review, Elsevier, Elsevier, vol. 22(2), pages 392-406.
  13. Abdul Karim, Zulkefly & Zaidi, Mohd Azlan Shah & Ismail, Mohd Adib & Abdul Karim, Bakri, 2011. "Institutions and foreign direct investment (FDI) in Malaysia: empirical evidence using ARDL model," MPRA Paper 31899, University Library of Munich, Germany.
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  17. Tidiane Kinda, 2014. "The Quest for Non-Resource-Based FDI: Do Taxes Matter?," IMF Working Papers, International Monetary Fund 14/15, International Monetary Fund.

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