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Determinants of FDI Localization in China: A County-Level Analysis for the Pharmaceutical Industry

Author

Listed:
  • Su Li

    (Antai College of Economics and Management, Shanghai Jiao Tong University, 1954 Huashan Road, Shanghai 200030, China)

  • Antonio Angelino

    (Department of Economics and Management, University of Ferrara, Via Voltapaletto 11, 44121 Ferrara, Italy)

  • Haitao Yin

    (Antai College of Economics and Management, Shanghai Jiao Tong University, 1954 Huashan Road, Shanghai 200030, China)

  • Francesca Spigarelli

    (China Center, University of Macerata, Via Piaggia dell’Università 2, 62100 Macerata, Italy)

Abstract

Foreign direct investments (FDIs) have been widely recognized as a crucial feature of the Chinese industrial development process. Over the past decades, China has been attracting huge amounts of inward FDIs as a consequence of both spontaneous market dynamics and place-based preferential policies at the sub-national level. However, the Chinese market exhibits large dissimilarities in terms of FDI localization across territories that are worth investigating at a more disaggregated level. In this regards, our study explores the determinants of attraction of inward FDIs in China, at the county level. It focuses on the pharmaceutical industry and attempts to assess whether factors related to location advantages, agglomeration dynamics, information cost effects and environmental regulation costs affect foreign firms’ localization choices as well as invested amounts in that location. By means of discrete choice models, our paper confirms the findings of the prevalent literature about the positive effects of location advantages on pharmaceutical FDI attraction. Different from our expectations, a higher proportion of foreign enterprises do not stimulate significant effects on FDI localization, while preferential policies and sectoral agglomeration are positively correlated with the localization of pharmaceutical foreign firms. Finally, our results suggest that investing firms tend to avoid areas with strict environment regulation.

Suggested Citation

  • Su Li & Antonio Angelino & Haitao Yin & Francesca Spigarelli, 2017. "Determinants of FDI Localization in China: A County-Level Analysis for the Pharmaceutical Industry," IJERPH, MDPI, vol. 14(9), pages 1-20, August.
    • Handle: RePEc:gam:jijerp:v:14:y:2017:i:9:p:985-:d:110366
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    References listed on IDEAS

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    Cited by:

    1. Shihong Zeng & Ya Zhou, 2021. "Foreign Direct Investment’s Impact on China’s Economic Growth, Technological Innovation and Pollution," IJERPH, MDPI, vol. 18(6), pages 1-24, March.
    2. Yinhao Wu & Changhong Miao & Jianming Miao & Yan Zhang, 2020. "How Does Environmental Regulation Affect the Location of New Polluting Firms? Exploring the Agglomeration Threshold of Effective Environmental Regulation," IJERPH, MDPI, vol. 17(4), pages 1-16, February.
    3. Mohd Shahidan Shaari & Muhamad Huzaifah Asbullah & Noorazeela Zainol Abidin & Zulkefly Abdul Karim & Benjamin Nangle, 2023. "Determinants of Foreign Direct Investment in ASEAN+3 Countries: The Role of Environmental Degradation," IJERPH, MDPI, vol. 20(3), pages 1-14, January.
    4. Wanfu Jin & Chunshan Zhou, 2022. "Effect of Land Marketization Level and Land Prices on Foreign Direct Investment in China," Land, MDPI, vol. 11(9), pages 1-20, August.
    5. O. V. Kuznetsova & R. O. Bobrovsky, 2022. "Location of the Largest Pharmaceutical Companies in Russia: Contribution to Regional Divergence or Convergence?," Regional Research of Russia, Springer, vol. 12(2), pages 124-132, June.
    6. Yinhao Wu & Shumin Yu & Xiangdong Duan, 2021. "The Impact of Environmental Regulation on the Location of Pollution-Intensive Industries in China under Agglomeration Effect," IJERPH, MDPI, vol. 18(8), pages 1-14, April.
    7. Marek Csabay & Zuzana Vincúrová & Milan Stoch & Beáta Stehlíková, 2021. "Enterprise ownership patterns in the least developed districts of Slovakia," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 16(4), pages 807-838, December.

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