IDEAS home Printed from https://ideas.repec.org/p/adl/cercwp/1997-12.html
   My bibliography  Save this paper

The Location Determinants of Foreign Direct Investment in Developing Countries

Author

Listed:
  • Chen Chunlai

Abstract

Using an econometric regression analysis to test the hypotheses based on the location advantages of the theory of FDI, this paper investigated and answered two main questions: what are the location determinants of FDI inflows into developing countries and what is the relative performance of China in attracting FDI inflow as compared with other developing countries in general and as compared with its Asian neighbouring countries in particular? First, the study shows that given the ownership advantages and the internalisation advantages of the source countries, the location advantages of host countries are very important in determining the distribution of the magnitude of FDI inflows. Second, the regression results provided strong support for the acceptance of the hypotheses. The main findings are: countries with larger market size, faster economic growth, higher per capita income, a higher level of FDI stock and more liberalised trade policies represented by a higher degree of openness attracted relatively more FDI inflows, while higher efficiency wages and greater remoteness from the rest of the world deterred FDI inflows. Third, by using the statistical model as an empirical norm, the study found that China's relative performance in attracting FDI inflow was only at a level moderately above average both among the developing countries and among the East and South-East Asian countries. Therefore, despite the fact that China is the largest FDI recipient among the developing countries and has attracted a large amount of FDI inflow in absolute dollars, in terms of its huge market size, fast economic growth, low labour costs and other economic and geographical characteristics, China received only its fair share of FDI inflows into developing countries, or at most marginally more than its potential from 1987 to 1994.

Suggested Citation

  • Chen Chunlai, 1997. "The Location Determinants of Foreign Direct Investment in Developing Countries," Chinese Economies Research Centre (CERC) Working Papers 1997-12, University of Adelaide, Chinese Economies Research Centre.
  • Handle: RePEc:adl:cercwp:1997-12
    as

    Download full text from publisher

    File URL: http://www.economics.adelaide.edu.au/research/papers/cerc/cercwp1997-12.pdf
    Download Restriction: no

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Céline Azémar & Rodolphe Desbordes, 2009. "Public Governance, Health and Foreign Direct Investment in Sub-Saharan Africa," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 18(4), pages 667-709, August.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:adl:cercwp:1997-12. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dmitriy Kvasov). General contact details of provider: http://edirc.repec.org/data/ceradau.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.