A Study Of Agglomeration Effects Of Same-Origin On FDI Location Choice

In the era of economic globalization, FDI plays an important role in transferring capital, technology and managerial skills among countries（regions）. Therefore, widespread concern has been paid to FDI location choice since it occurred. Known as the largest developing country and second largest economy in the world. China’s FDI location choice has drawn numerous researchers’attention. Since "the Southern Speech" by Deng Xiaoping in 1992, FDI worldwide has been flooding into China. In 2002, China grew into the largest FDI destination for the first time.From the perspective of country-of-origin, China Hong Kong, China Taiwan, America, Japan and South Korea can be served as Mainland China’s major FDI origin. If we observe the FDI location among Chinese provinces carefully, we can find out the agglomeration effect of same-origin. Namely, Japanese MNEs choose to agglomerate in the Yangtze River Delta while Taiwanese MNEs prefer both the Pearl River Delta and the Yangtze River Delta. Why does the agglomeration effect of same-origin exist in the process of FDI location choice? This problem is rarely discussed by domestic researchers, let alone the research of comparison among different origins. This thesis attempts to solve this problem and compare the different origins’agglomeration effect based on Japan and Taiwan FDI.This thesis firstly concludes the definition of agglomeration effect of same-origin and then explores and classifies the five mechanisms into micro, medium and macro categories according to Dunning’s I-O-L theory. In the following empirical part, the thesis constructs the index of location quotient to verify the existence of agglomeration effect of same-origin. Fortunately, we draw an anticipated result for the indices of location quotient of Japanese and Taiwanese FDI are all greater than 1 in Mainland China’s most eastern provinces. Considering the limitation of data, this thesis can only analyze three mechanisms-study effect, externalities of agglomeration and institutional environment. We conclude that the three mechanisms all exert prominent influences on Japanese and Taiwanese FDI location choice, but differ in significance. Specifically, the influence of the externalities of agglomeration is more profound than study effect and a correctional environment hampers the FDI location choice. However, the degree of propriety protection has a greater effect on Taiwanese FDI than Japanese FDI. Furthermore, the robustness test can show the impact as well as the changing pattern of the three mechanisms-for Japanese FDI, agglomeration effect and study effect both show an increasing pattern which coordinately lead to the agglomeration of Japanese MNEs in Mainland China’s eastern coastal area while for Taiwanese FDI, the agglomeration effect increases with the decrease of study effect.