Abstract
Foreign direct investment (FDI) is an important force to promote economic growth and social development in both developed and developing countries, while the distribution of FDI in the world and within countries is extremely uneven. This paper systematically summarizes the main determinants that affect the location choice of FDI in recent theoretical and empirical studies, including institution and investment environment, trade cost and industrial agglomeration, market size and natural resource, cultural distance and social network. Based on the work of this paper, it is helpful to better understand the location preference of multinational enterprises (MNEs) in FDI activities, and provide a reference basis for the host country to attract investment and promote economic growth.
Highlights
As we know, Foreign direct investment (FDI) has a positive effect on the economic growth, social development and technological progress of the host country from the experience of both developed and developing countries
Based on the summary of existing literature, this paper classifies the main determinants on FDI location choice of multinational enterprises (MNEs) into four aspects, which are institution and investment environment, trade cost and industrial agglomeration, market size and natural resource, cultural distance and social network
In order to successfully carry out production and operation activities, multinational enterprises usually investigate the institution design and investment environment of the host country at the macro level, so as to reduce possible systemic risks such as political instability and sovereign crisis
Summary
FDI has a positive effect on the economic growth, social development and technological progress of the host country from the experience of both developed and developing countries. As shown, most of the FDI inflows is concentrated in the eastern coastal areas of China at 2000, and it is rare in the western region, after China joins in the WTO at 2001, the situation changes slightly It shows that multinational enterprises have strong strategic methods for the location destination when making FDI decisions.
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