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Firm Heterogeneity and Location Choices: Evidence from Foreign Manufacturing Investments in China

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  • Junjie Hong

    (School of International Trade and Economics, University of International Business and Economics, Beijing, 100029, China, hongjunjie@alumni.nus.edu.sg)

Abstract

This paper develops a model which indicates that foreign firms’ location choices are determined jointly by site attributes and firm heterogeneity. The model is estimated using data on 2565 foreign manufacturing investments in China. The conditional logit estimates and simulation results provide supportive evidence. An increase in a firm’s labour intensity magnifies the impact of labour cost, while a location’s local communications infrastructure has a stronger influence on foreign firms that have adopted modern information technology. It is also found that agglomeration effects decrease with firm size and labour quality. Implications for researchers and policy-makers are discussed in the conclusion.

Suggested Citation

  • Junjie Hong, 2009. "Firm Heterogeneity and Location Choices: Evidence from Foreign Manufacturing Investments in China," Urban Studies, Urban Studies Journal Limited, vol. 46(10), pages 2143-2157, September.
    • Handle: RePEc:sae:urbstu:v:46:y:2009:i:10:p:2143-2157
    DOI: 10.1177/0042098009339425
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    References listed on IDEAS

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    3. De Beule, Filip & Duanmu, Jing-Lin, 2012. "Locational determinants of internationalization: A firm-level analysis of Chinese and Indian acquisitions," European Management Journal, Elsevier, vol. 30(3), pages 264-277.
    4. Blanc-Brude, Frédéric & Cookson, Graham & Piesse, Jenifer & Strange, Roger, 2014. "The FDI location decision: Distance and the effects of spatial dependence," International Business Review, Elsevier, vol. 23(4), pages 797-810.

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