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Mode of Entry and the Regional Distribution of Foreign Direct Investment in China

  • Daniel Shapiro
  • Yao Tang
  • Cathy Xuejing
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In this paper we re-examine the regional determinants of FDI in China using both total FDI flows, and FDI flows disaggregated by entry mode. Building on both the FDI location and entry mode choice literatures, we argue for the existence of mode-specific location advantages, and test for their existence. We first specify and estimate a location model of aggregate FDI flows to Chinese regions. Using the aggregate model as a benchmark, we then estimate separate equations for each of three different entry modes (wholly-owned subsidiaries, equity joint ventures and cooperative joint ventures), and compare the results with the aggregate model. The results indicate that mode-specific location advantages do exist, at least within China, but they are limited to a small number of factors. In particular, we identify the accumulated stock of FDI as being more likely to attract high control modes of entry, while existing policies to attract FDI are more likely to attract lower control modes of entry.

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Article provided by Taylor & Francis Journals in its journal Journal of Chinese Economic and Business Studies.

Volume (Year): 5 (2007)
Issue (Month): 3 ()
Pages: 261-277

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Handle: RePEc:taf:jocebs:v:5:y:2007:i:3:p:261-277
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