Drawing from the institution-based view of Mike W. Peng and related scholarship in economics, international business, and public administration, this study seeks to explore: what formal institutional factors in a host country drive multinational enterprises’ location choice by way of greenfield foreign direct investment? To answer this question, this study offers a state mechanism perspective in an emerging economy context, thus underscoring that the host country’s formal institutions, such as economic openness and good governance, are key determinants. Our proposed model reasons that countries with improved economic regulations, superior physical infrastructure provisions, and transparent and effective public governance systems, combined with the marketization of public goods and services, are very attractive for multinational ventures. In so doing, institutional transformation and economic achievements pertaining to aspirant economies like China are discussed. Finally, this study concludes with several practical implications. The novelty of this study is to design a state mechanism model and hypothesize key national and subnational-level formal institutional factors that strikingly influence multinational firms’ location strategy by explaining the host country’s attractiveness for foreign direct investment.