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MNC's location choice and agglomeration: a comparison between US and European affiliates in China

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  • Jean-Louis Mucchielli
  • Pei Yu

Abstract

US and European multinational corporations encounter greater cultural barriers than Asian multinational corporations when investing in China, and the global economic recession further raises their location risks. Using data from the ‘2007 Fortune 500’ list, we conduct conditional logit estimations to test the main determinants of the choices made by 457 US and 537 European manufacturing affiliates located in China during the period 1995--2007, just prior to the economic crisis. Our main finding is that market size, production costs, agglomeration effects and geographical location impact significantly on both US and European firms' choices. Agglomeration is the preferred strategy of the sample firms. We also show that the host sector's technological intensity has a greater impact on US firms than on European ones.

Suggested Citation

  • Jean-Louis Mucchielli & Pei Yu, 2011. "MNC's location choice and agglomeration: a comparison between US and European affiliates in China," Asia Pacific Business Review, Taylor & Francis Journals, vol. 17(4), pages 431-453, October.
    • Handle: RePEc:taf:apbizr:v:17:y:2011:i:4:p:431-453
    DOI: 10.1080/13602381.2011.546627
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    References listed on IDEAS

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    1. Jean-Louis Mucchielli, 2008. "La mondialisation : chocs et mesure," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00311130, HAL.
    2. John H. Dunning & Sarianna M. Lundan, 2008. "Multinational Enterprises and the Global Economy, Second Edition," Books, Edward Elgar Publishing, number 3215.
    3. Jean-Louis Mucchielli, 2008. "La mondialisation : chocs et mesure," Post-Print halshs-00311130, HAL.
    4. Belderbos, Rene & Carree, Martin, 2002. "The Location of Japanese Investments in China: Agglomeration Effects, Keiretsu, and Firm Heterogeneity," Journal of the Japanese and International Economies, Elsevier, vol. 16(2), pages 194-211, June.
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    Cited by:

    1. Jr-Tsung Huang & Ming-Lei Chang, 2018. "Fiscal Transparency And Foreign Direct Investment In China," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 63(04), pages 839-859, September.
    2. Hecht, Veronika, 2015. "Location choice of German multinationals in the Czech Republic : the importance of agglomeration economies," IAB-Discussion Paper 201519, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    3. Stirbat, Liviu & Record, Richard & Nghardsaysone, Konesawang, 2015. "The Experience of Survival: Determinants of Export Survival in Lao PDR," World Development, Elsevier, vol. 76(C), pages 82-94.
    4. Veronika Hecht, 2017. "Location choice of German multinationals in the Czech Republic," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 25(4), pages 593-623, October.

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