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Structure of Firm Location Choices: An Examination of Japanese Greenfield Investment in China


  • Shaoming Cheng


This paper presents an empirical investigation of the location decision structure of Japanese investors in China. In this study, a nested logit model and rich Japanese firm-level greenfield manufacturing foreign direct investment data are calibrated together. This examination is not only driven by the unsatisfactory model specification of the conditional logit model in previous location choice analyses, specifically the violation of the independence from irrelevant alternatives assumption; but is also driven by the urgent need to better understand foreign investors' in general and Japanese investors' in particular location decision structure in China. Two potential hierarchical and sequential location decision-making structures of Japanese investors are then tested, which are respectively in line with the spatial divide of China's FDI preferential policies and with China's six traditional census areas. Copyright 2007 The Author Journal compilation 2007 East Asian Economic Association and Blackwell Publishing Ltd .

Suggested Citation

  • Shaoming Cheng, 2007. "Structure of Firm Location Choices: An Examination of Japanese Greenfield Investment in China ," Asian Economic Journal, East Asian Economic Association, vol. 21(1), pages 47-73, March.
  • Handle: RePEc:bla:asiaec:v:21:y:2007:i:1:p:47-73

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    8. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-116, March.
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    Cited by:

    1. repec:spr:manint:v:49:y:2009:i:4:d:10.1007_s11575-009-0003-x is not listed on IDEAS
    2. Chen, George Shih-Ku, 2009. "Agglomeration economies and the location of Taiwanese investment in China," MPRA Paper 13896, University Library of Munich, Germany.
    3. María C. Latorre & Nobuhiro Hosoe, 2014. "How much can foreign multinationals affect the Chinese economy? A dynamic general equilibrium analysis of Japanese FDI," GRIPS Discussion Papers 14-16, National Graduate Institute for Policy Studies.
    4. Latorre, María C. & Hosoe, Nobuhiro, 2016. "The role of Japanese FDI in China," Journal of Policy Modeling, Elsevier, vol. 38(2), pages 226-241.
    5. Nielsen, Bo Bernhard & Asmussen, Christian Geisler & Weatherall, Cecilie Dohlmann, 2017. "The location choice of foreign direct investments: Empirical evidence and methodological challenges," Journal of World Business, Elsevier, vol. 52(1), pages 62-82.
    6. Norifumi Kawai, 2011. "The Role of Institutional Conditions in Japanese FDI in European Transition Economies," Chapters,in: Institutional Variety in East Asia, chapter 11 Edward Elgar Publishing.
    7. Jiatao Li & Cuili Qian & Fiona K. Yao, 2015. "Confidence in learning: Inter- and intraorganizational learning in foreign market entry decisions," Strategic Management Journal, Wiley Blackwell, vol. 36(6), pages 918-929, June.
    8. Chen, George Shih-Ku, 2009. "Determinants of Taiwanese investment in China: An agglomeration economies-based perspective," MPRA Paper 13894, University Library of Munich, Germany.

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