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Digital Economy and Foreign Direct Investment Location Choice: Evidence from Chinese Cities

Author

Listed:
  • Ziang Qiu

    (Faculty of Business Administration, University of Macau)

  • Baibing Huang

    (School of Liberal Arts, Macau University of Science and Technology, Macao SAR, China)

  • Yang Zhang

    (Faculty of Business Administration, University of Macau; Asia-Pacific Academy of Economics and Management, University of Macau, Macao SAR, China)

Abstract

The development of the digital economy has the potential to impact resource allocation efficiency within a region. This study examines the direct and spatial effects of digital economy development on the location choice of foreign direct investment (FDI) in Chinese cities. The findings indicate that digital economy development not only enhances the inflow of foreign direct investment within a region but also influences FDI inflows in neighboring regions, with spillover effects diminishing as geographical distance increases. To address endogeneity concerns, staggered Difference-inDifferences (DID) and spatial DID models are introduced in an event study to validate our main findings. Moreover, regional heterogeneity analysis reveals that the impact of digital economy development on FDI location decisions is particularly significant in eastern and coastal cities. The results offer an empirical foundation for emerging market countries, such as China, to advance sustainable digital economy development, enhance resource allocation efficiency, and support foreign investors in making informed investment location decisions.

Suggested Citation

  • Ziang Qiu & Baibing Huang & Yang Zhang, 2026. "Digital Economy and Foreign Direct Investment Location Choice: Evidence from Chinese Cities," Working Papers 202642, University of Macau, Faculty of Business Administration.
    • Handle: RePEc:boa:wpaper:202642
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    Keywords

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    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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