Factors determining location choice of foreign direct investment in China : a perspective from an inland province : a thesis presented in partial fulfillment of the requirements for the degree of Doctor of Philosophy in Management at Massey University (Albany), New Zealand
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Date
2009
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Massey University
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Abstract
This study aims to formulate a conceptual framework regarding foreign direct investment (FDI) location choice made by multinational enterprises (MNE) and to investigate factors determining FDI location choices, through empirically testing the framework and associated hypotheses in the research setting of one of China's inland regions. FDI has been widely recognised as a major driving force of globalisation, which is a powerful catalyst for achieving national economic development and global integration of MNEs. In respect to the various key issues of MNE's FDI, the location choice is complex, multidimensional, and critical and it affects the economic growth of host countries, as well as the efficiency and effectiveness of the MNE's investment abroad. Considering that the emerging economies, such as China, have achieved dramatic development on FDI flows, this new phenomenon of FDI location in emerging economics challenges the existing FDI location theories, which were built in the setting of developed countries. The existing literature also suggests that more attention should be paid to the examination of FDI locational determinants, as the existing literature in this field has been dominated by research into FDI location at a cross-national level. At the sub-national level regional differences in terms of FDI location choice can be examined at great length. It is, therefore, expected to bring forth more accurate and concrete evidence regarding the sensitivity of FDI decisions to locational determinants. To address the research gap of FDI location choice, this study develops a conceptual framework regarding FDI location choice by MNEs based on an integration of various FDI theories. Hypotheses derived from the framework are empirically tested using data collected through a postal questionnaire survey. The survey was conducted during the period from December 2006 to March 2007 in Gansu - an inland province of China. All foreign-invested enterprise firms in Gansu were included in the sample and the survey resulted in 106 firms returning valid responses. The conclusions drawn from this study suggested that an investing firm's FDI location choice is made based on the consideration of a scries of factors, including the firm's capability, location factors from host region, strategic motives, and internalisation factors. This study contributes to the literature of FDI location choice by constructing a conceptual framework that can explain foreign direct investment location choice of MNEs in a setting of an inland region of a developing country. The empirical evidence from the study supports the contention that firm size, international experience, cost factor, investment incentives, agglomeration, investment risk and other factors in regards to the firm's strategic motives, play a critical role in FDI location choice in China's inland regions.
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Keywords
Foreign investment, Multinational companies, Investment, China