Location Strategies of Foreign Investors in China: Evidence from Japanese Manufacturing Multinationals

Abstract

The goal of this study is to examine the determinants of the industrial location of Japanese manufacturing foreign direct investment (FDI) in China for the period from 1998 to 2006 at the provincial level. We stress that the determinants of FDI strategies cannot be tested sufficiently without a fine-grained analysis of the association between institutions and organizations. In an extension of institution theory, we identified that institutions such as special economic zones (SEZs), a greater degree of protection of intellectual property rights, and the weak concentration of state-owned enterprises (SOEs) act as crucial determinants of recruiting Japanese manufacturing FDI.