Asia Pacific Journal of Management

, Volume 33, Issue 2, pp 343–370 | Cite as

Location decisions of inward FDI in sub-national regions of a host country: Service versus manufacturing industries

  • In Hyeock (Ian) LeeEmail author
  • Eunsuk Hong
  • Shige Makino


Built on the differences between services and manufacturing sectors, this study examines the general proposition that service and manufacturing multinational enterprises (MNEs) have different responsiveness to location-specific characteristics when conducting foreign direct investment (FDI), and that these differences influence their final locations in the sub-national regions of a host country. Using a full population of 1,212 and 6,199 inward FDI projects conducted by MNEs in manufacturing and services sectors, respectively, across 234 sub-national regions in Korea between 2000 and 2004, it finds that the location decisions made by service MNEs are more likely to be driven by demand-side considerations, whereas those made by manufacturing MNEs are more likely to be influenced by supply-side characteristics of sub-national regions. In addition, it shows that sub-national location decisions made by both high-tech and low-tech manufacturing MNEs consider the availability of local strategic assets within a focal region more importantly than that from its neighboring regions, suggesting the importance of intra-regional effects. Sub-national location decisions made by location-bound service MNEs exhibit the same intra-regional effects for local market potential; however, those by non-location-bound service MNEs consider the local market potential from neighboring regions more importantly than that within a focal region, suggesting the existence of inter-regional effects.


MNEs Inward FDI Service industries Manufacturing industries Location strategy Sub-national regions 



The first author gratefully acknowledges the financial support from Indiana University CIBER (Center for International Business Education & Research) Business Ph.D. Dissertation Award and Barbara J. Clark-Edwards Doctoral Dissertation Scholarship for this article.


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Copyright information

© Springer Science+Business Media New York 2016

Authors and Affiliations

  • In Hyeock (Ian) Lee
    • 1
    Email author
  • Eunsuk Hong
    • 2
  • Shige Makino
    • 3
  1. 1.Department of Management, Quinlan School of BusinessLoyola University ChicagoChicagoUSA
  2. 2.Department of Financial & Management StudiesSOAS, University of LondonLondonUK
  3. 3.Department of Management, Faculty of Business AdministrationThe Chinese University of Hong KongShatinHong Kong

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