Locational choices and export decisions of foreign manufacturing enterprises in China

Some transitional economies have attracted large amounts of foreign direct investments in the past decade. Understanding the behaviors of foreign investors in those transitional economies, such as China, has been of particular interest to many scholars. The purpose of this dissertation is to investigate the systematic forces that determine the locational choices and export decisions of foreign manufacturing enterprises in China. This study tests the hypothesis that agglomeration economies and economic transitions influence the locational choices of foreign manufacturing enterprises. A conditional logit model shows that the significant variables influencing the locational choices of foreign manufacturing enterprises include a region's percentage of manufacturing employment, its previous foreign direct investment stocks, market potential, economic openness, investment incentives, and its degree of economic liberalization. Statistical analysis also confirms that foreign entry mode, global region of origin, and sector influence these locational choices. A binomial logit model tests the hypothesis that internal and external scale economies significantly improve the exporting propensity of foreign manufacturing enterprises. Statistical results reveal that larger and more productive foreign manufacturing enterprises are more likely to export. Locating in industrial clusters and near other exporting foreign firms also significantly improves the exporting propensity of foreign manufacturing enterprises. Locational choices of foreign manufacturing enterprises not only affect their export propensities, but their export behaviors. Foreign entry mode, global region of origin, and sector are also important factors affecting the export decisions of foreign manufacturing enterprises. This research broadens and deepens the understanding of the behaviors of foreign firms in a developing transitional economy. This study confirms that foreign manufacturing investments in transitional developing economies tend to concentrate in a few places. Agglomeration forces and economic transitions cause this geographical concentration. Spatial clustering of foreign firms, in turn, facilitates the exporting decisions of foreign manufacturing enterprises.