An Empirical Study On The Interaction Between Foreign Direct Investment And Industrial Agglomeration In HuBei

This paper investigates the theories of foreign direct investment (FDI) and industrial agglomeration, and gives a conclusion that there is a benign interaction between them. It means, at the time a contingency or historical event leading to industrial agglomeration in an area, the entry of foreign investment would strengthen this agglomeration effect; meanwhile, more foreign investment would be attracted to this area by scale economy, external effect, and strengthened industrial relevancy, which are caused by industrial agglomeration. Taking manufacturing industry in HuBei province for example, the paper makes an empirical test to see whether there is a predicted interaction between FDI and industrial agglomeration. Because of the attainability of data, we combine both qualitative analysis and quantitative analysis in our research work. This paper concentrates on empirical test, which tries to prove benign interaction between FDI and industrial agglomeration through HuBei's transportation equipment industry. Econometric test is applied in transportation equipment industry. However, because of data missing, we just make a qualitative analysis on optoelectronic industry and food manufacturing industry. In addition, for the purpose of developing industrial agglomeration in HuBei, the paper discusses the concerning cases in domestic and foreign countries and summarizes their successful experience.