Economic institutions and FDI location choice: Evidence from US multinationals in China

By Julan Du, Yi Lu, Zhigang Tao. 2008

454 citations recorded by the source corpus.

This paper examines the impacts of economic institutions, including property rights protection and contract enforcement, on the location choice of foreign direct investment. From a data set of 6288 US multinationals investing in various China's regions for the period of 1993-2001, it is found that US multinationals prefer to invest in those regions that have better protection of intellectual property rights, lower degree of government intervention in business operations, lower level of government corruption, and better contract enforcement. Our results are robust to alternative measures of economic institutions, different sub-samples, and different estimation strategies, and to the inclusion of control variables such as those for agglomeration economies, and other traditional factors of FDI location choice. Journal of Comparative Economics 36 (3) (2008) 412-429.

Subfields: Accounting, Economics and Econometrics, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/84a1c6d445dbb58601085cc9014eafe041e752f6

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Citations in the corpus

When does FDI matter? The roles of local institutions and ethnic origins of FDI (2013, background): “…setting.3 As the institutional development in China is unbalanced across regions and disparate in multiple dimensions, the NERI index is widely used to capture provincial differences in institutional development over time (Chen et al., 2009; Du et al., 2008; Gao et al., 2010; Li et al., 2011).”
Trust, Investment, and Business Contracting (2015, methodology): “In addition, we follow the literature on FDI (e.g., Du et al. (2008), Amiti and Javorcik (2008)) to control for the following factors in location choice: urbanization, infrastructure, education, wage, and industrial clustering.”
The FDI location decision: Distance and the effects of spatial dependence (2014, methodology): “The spatial models were estimated using Ord’s (1975) maximum likelihood method, as extended to panel data by Elhorst (2003). This was implemented in the statistical programming language R.”
Investment Climate and FDI in Developing Countries: Firm-Level Evidence (2010, background): “Secure property rights, political stability and lack of corruption allow markets to properly function, therefore attracting MNEs (Urata and Kawai 2000, Disdier and Mayer 2004, Du et al. 2007).”
Does Enforcement of Intellectual Property Rights Matter in China? Evidence from Financing and Investment Choices in the High-Tech Industry (2014, unknown): “Existing empirical evidence suggests a positive effect of the extent of IP laws on GDP growth (Gould and Gruben, 1996), direction of technical change (Moser, 2005), and foreign direct investment (Javorcik, 2004; Du et al., 2008).”