Study On The Effects Of Industrial Clusters On MNC's FDI Location Choice In China

Since reform and opening up, main factors affecting multinational corporations'direct investment location choice in China have been developed and changed. Late in the 1990s, industrial clusters have become a major factor. Compared with enterprise located in isolated place, enterprises within industrial clusters can more effectively meet the market conditions, adjust their labor force and employment levels, share specific capital infrastructure of the region and a wide range of non-trade input facilities at lower cost and get information and ideas on industry and market within the region more easily. With the theoretical framework of industrial clusters, the paper analyze how do industrial clusters affect MNC's direct investment location choice from space close to external economics respectively. Also, the paper use an individual-time fixed panel data model to build a more real acts equation than the cross section data model, and compare with traditional factors. That model suggests that policies is no longer preferential factors affecting the distribution of multinational direct investment, the cheap labor, huge market scale and infrastructure and high level of technological innovation which industrial clusters region owns are more important. Investment in industrial clusters region will help MNCs'achieve scale and scope economy, reduce costs, optimize resource allocation, increase productivity and accelerate technical innovation. In addition, the two aspects of MNCs'direct investment and the formation of industrial clusters have casual-endogenous mechanisms, industrial clusters is actually a complex network consists of authority, trade and information links, while multinational corporations play the hub role in the network, not only promoting the development of the industrial clusters, but also further attracting more multinational direct investment assigned.