Abstract
This paper analyses the location decision of Chinese manufacturing firms for their greenfield investments in Europe. The analysis draws on neo-institutional theory to formulate hypotheses on the importance of mimicry in Chinese firms’ location decisions and how this differs between private and state-owned enterprises. The analysis is conducted at the subnational (regional) level while taking into account economic integration across regions. The results confirm the importance of mimicry and show that Chinese firms not only follow previous Chinese investors in the same sector but also in unrelated sectors. Furthermore, Chinese investors only follow previous investments by Chinese private-owned companies while the results also show that Chinese private-owned companies generally have a higher tendency than state-owned companies do to follow prior investment decisions by compatriot firms. As the empirical evidence demonstrates the importance of bandwagon effects, the implication is that investment decisions can have a lasting influence on the geographical pattern of Chinese investments across regions.
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Notes
North American Industry Classification System.
Food, Tobacco and Beverages; Chemicals; Electronics; Machinery; Metal; Minerals; Others; Paper, Printing and Wood; Pharmaceuticals; Rubber; Textiles; Transport.
The regression output for these sensitivity analyses have not been included in the interest of space but are available from the authors.
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Appendices
Appendix 1: Top-20 regions with most Chinese investments, 2004–2012
NUTS-2 region | Frequency | Percentage |
|---|---|---|
Düsseldorf (DEA1) | 78 | 13.81 |
Darmstadt (DE71) | 59 | 10.44 |
Köln (DEA2) | 47 | 8.32 |
Inner London (UKI1) | 25 | 4.42 |
Île de France (FR10) | 25 | 4.42 |
Lombardia (ITC4) | 17 | 3.01 |
Oberbayern (DE21) | 13 | 2.3 |
Rhône-Alpes (FR71) | 11 | 1.95 |
Cataluña (ES51) | 10 | 1.77 |
Noord-Holland (NL32) | 10 | 1.77 |
West Midlands (UKG3) | 9 | 1.59 |
Berlin (DE30) | 8 | 1.42 |
Bucharest (RO32) | 8 | 1.42 |
Comunidad de Madrid (ES30) | 7 | 1.24 |
Brussels (BE10) | 6 | 1.06 |
Saarland (DEC0) | 6 | 1.06 |
Attica (EL30) | 6 | 1.06 |
Zuid-Holland (NL33) | 6 | 1.06 |
Stockholm (SE11) | 6 | 1.06 |
UKC2 (Northumberland and Tyne and Wear) | 6 | 1.06 |
Total top-20 | 363 | 64.25 |
Other regions | 202 | 35.75 |
Total | 565 | 100 |
Appendix 2: Number of Chinese investments, by industry sector, 2004–2012
Industry | Frequency | Percentage |
|---|---|---|
Communications | 92 | 16.28 |
Electronic Components | 81 | 14.34 |
Industrial machinery, equipment and tools | 70 | 12.39 |
Software and IT services | 32 | 5.66 |
Consumer electronics | 30 | 5.31 |
consumer products | 29 | 5.13 |
Textiles | 27 | 4.78 |
Automotive components | 25 | 4.42 |
Metals | 25 | 4.42 |
Automotive OEM | 22 | 3.89 |
Medical devices | 20 | 3.54 |
Chemicals | 17 | 3.01 |
Business machines and equipment | 14 | 2.48 |
Alternative/renewable energy | 12 | 2.12 |
Food and tobacco | 10 | 1.77 |
Transportation | 10 | 1.77 |
Plastics | 9 | 1.59 |
Pharmaceuticals | 7 | 1.24 |
Engines and turbines | 6 | 1.06 |
Non-automotive transport OEM | 6 | 1.06 |
Paper, printing and packaging | 5 | 0.88 |
Biotechnology | 4 | 0.71 |
Wood products | 3 | 0.53 |
Aerospace | 2 | 0.35 |
Beverages | 2 | 0.35 |
Minerals | 2 | 0.35 |
Semiconductors | 2 | 0.35 |
Rubber | 1 | 0.18 |
Total | 565 | 100 |
Appendix 3: Distribution over host countries, 2004–2012
Host country | Frequency | Percentage |
|---|---|---|
Germany | 250 | 44.25 |
Great Britain | 76 | 13.45 |
France | 46 | 8.14 |
Netherlands | 27 | 4.78 |
Spain | 27 | 4.78 |
Italy | 22 | 3.89 |
Hungary | 16 | 2.83 |
Belgium | 15 | 2.65 |
Sweden | 15 | 2.65 |
Poland | 14 | 2.48 |
Romania | 11 | 1.95 |
Austria | 7 | 1.24 |
Bulgaria | 7 | 1.24 |
Czech Republic | 7 | 1.24 |
Denmark | 7 | 1.24 |
Greece | 6 | 1.06 |
Ireland | 4 | 0.71 |
Lithuania | 3 | 0.53 |
Portugal | 2 | 0.35 |
Finland | 1 | 0.18 |
Latvia | 1 | 0.18 |
Slovak Republic | 1 | 0.18 |
Total | 565 | 100 |
Appendix 4: Definition and summary statistics of all variables (reported values are original values before taking logarithms)
Variable | Definition | Mean | Std. dev. | Min. | Max. |
|---|---|---|---|---|---|
GDP growth | Log of (1 + GDP growth of NUTS-2 region) | 0.02 | 0.07 | −0.205 | 0.46 |
Airport traffic | Log of (1 + air transport of passengers of NUTS-2 region) (total passengers embarked and disembarked, in 1000s) | 213,512 | 401,361 | 0 | 990,099 |
Seaport | Dummy variable indicating whether the NUTS-2 region has an operative seaport (for freight transport) | 0.47 | 0.50 | 0 | 1 |
Unemployment rate | Log of (1 + unemployment rate of NUTS-2 region) | 8.15 | 3.97 | 1.9 | 30.4 |
Tertiary education | Log of (1 + percentage of labour force with tertiary education of NUTS-2 region) | 24.38 | 8.38 | 6.5 | 59.7 |
Corporate Tax | Log of (1 + corporate tax rate of host country) | 0.28 | 0.06 | 0.13 | 0.4 |
Cultural Distance | Log of (1 + Kogut and Singh index of host country) (based on 5 dimensions) | 2.89 | 0.72 | 1.63 | 5.06 |
Freedom from corruption | Log of (freedom from corruption ranking of host country) (the higher the better) | 68.14 | 17.37 | 26 | 99 |
Market size | Log of (population of NUTS-2 region) | 1,906,758 | 1,566,120 | 66,412 | 11,851,399 |
Market potential | Log of (population of all surrounding regions of NUTS-2 region) − distance weighted | 698,034 | 237,575 | 160,908 | 1,266,900 |
Technological strength | Log of (1 + share of NUTS-2 region in EU28 patent applications) (at industry level) | 0.004 | 0.01 | 0 | 0.16 |
Industrial specialization | Log of (1 + location quotient of the NUTS-2 region and industry of the investing firm) | 1.03 | 2.01 | 0 | 76.56 |
Diversity | Log of (1 + Herfindahl–Hirschmann index of shares of foreign investments in a given NUTS-2 region and sector with respect to total foreign investments in that region) | 0.15 | 0.17 | 0 | 1 |
Industrial specialization—squared | Squared measure of specialization index | 2.30 | 17.40 | 0 | 3418.46 |
Experience | Dummy variable indicating whether investing firm has previous investment(s) in NUTS-2 region | 0.01 | 0.08 | 0 | 1 |
Global city | Dummy variable indicating whether a global city is situated in the NUTS-2 region | 0.10 | 0.30 | 0 | 1 |
Previous investments by non-Chinese firms in the same sector | Log (1 + count of non-Chinese investments in the NUTS-2 region and industry of the investing firm, in the preceding year) | 0.61 | 2.05 | 0 | 113 |
Previous investments Chinese firms—all | Log (1 + count of Chinese investments in the NUTS-2 region, in the preceding year) | 0.37 | 1.83 | 0 | 34 |
Previous investments Chinese firms—other sectors | Log (1 + count of Chinese investments in the NUTS-2 region, not in industry of the investing firm, in the preceding year) | 0.28 | 1.47 | 0 | 33 |
Previous investments Chinese firms—same sector | Log (1 + count of Chinese investments in the NUTS-2 region and industry of the investing firm, in the preceding year) | 0.03 | 0.26 | 0 | 9 |
Previous investments state-owned Chinese firms | Log (1 + count of state-owned Chinese investments in the NUTS-2 region, in the preceding year) | 0.10 | 0.46 | 0 | 6 |
Previous investments private Chinese firms | Log (1 + count of private Chinese investments in the NUTS-2 region, in the preceding year) | 0.27 | 1.57 | 0 | 30 |
Previous investments state-owned Chinese firms—other sectors | Log (1 + count of state-owned Chinese investments in the NUTS-2 region, not in industry of the investing firm, in the preceding year) | 0.08 | 0.39 | 0 | 6 |
Previous investments private Chinese firms—other sectors | Log (1 + count of private Chinese investments in the NUTS-2 region, not in industry of the investing firm, in the preceding year) | 0.20 | 1.28 | 0 | 30 |
Previous investments state-owned Chinese firms—same sector | Log (1 + count of state-owned Chinese investments in the NUTS-2 region and industry of the investing firm, in the preceding year) | 0.01 | 0.08 | 0 | 2 |
Previous investments private Chinese firms—same sector | Log (1 + count of private Chinese investments in the NUTS-2 region, not in industry of the investing firm, in the preceding year) | 0.02 | 0.24 | 0 | 9 |
Appendix 5: Correlation table of all variables (obs = 130,119)
Y | 1. | 2. | 3. | 4. | 5. | 6. | 7. | 8. | 9. | 10. | 11. | 12. | 13. | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
1. GDP growth | 0.00 | 1 | ||||||||||||
2. Airport traffic | 0.02 | 0.05 | 1 | |||||||||||
3. Seaport | −0.01 | −0.09 | −0.17 | 1 | ||||||||||
4. Unemployment rate | −0.01 | −0.07 | −0.03 | 0.12 | 1 | |||||||||
5. Tertiary education | 0.03 | −0.12 | −0.03 | 0.13 | −0.15 | 1 | ||||||||
6. Corporate tax | 0.02 | −0.06 | −0.24 | 0.11 | −0.02 | 0.20 | 1 | |||||||
7. Cultural distance | −0.02 | −0.09 | 0.06 | 0.35 | −0.16 | 0.18 | −0.03 | 1 | ||||||
8. Freedom from corruption | 0.02 | −0.21 | −0.14 | 0.13 | −0.33 | 0.59 | 0.52 | 0.32 | 1 | |||||
9. Market size | 0.07 | −0.01 | 0.01 | −0.04 | 0.12 | 0.14 | 0.06 | −0.25 | −0.02 | 1 | ||||
10. Market potential | 0.04 | −0.03 | 0.05 | −0.47 | −0.37 | 0.25 | 0.27 | −0.27 | 0.37 | 0.18 | 1 | |||
11. Technological strength | 0.10 | −0.01 | −0.01 | −0.13 | −0.16 | 0.22 | 0.25 | −0.13 | 0.26 | 0.38 | 0.27 | 1 | ||
12. Specialization | 0.03 | −0.01 | 0.02 | −0.08 | −0.05 | 0.11 | −0.04 | −0.07 | 0.08 | 0.19 | 0.14 | 0.13 | 1 | |
13. Diversity | −0.02 | 0.03 | −0.06 | 0.13 | 0.02 | −0.23 | 0.15 | 0.12 | −0.11 | −0.38 | −0.23 | −0.10 | −0.22 | 1 |
14. Specialization—squared | 0.02 | −0.01 | 0.00 | −0.06 | −0.07 | 0.10 | 0.06 | −0.05 | 0.12 | 0.11 | 0.15 | 0.15 | 0.59 | −0.08 |
15. Experience | 0.06 | 0.01 | 0.02 | 0.00 | −0.01 | 0.04 | −0.01 | 0.02 | 0.00 | 0.07 | 0.02 | 0.08 | 0.06 | −0.03 |
16. Global city | 0.09 | 0.01 | 0.17 | 0.01 | 0.00 | 0.29 | 0.01 | 0.04 | 0.06 | 0.36 | 0.05 | 0.28 | 0.05 | −0.11 |
17. Previous investments by non-Chinese firms in the same sector | 0.08 | 0.03 | 0.06 | −0.05 | −0.02 | 0.20 | −0.07 | −0.07 | 0.01 | 0.34 | 0.08 | 0.26 | 0.42 | −0.19 |
18. Previous investments Chinese firms—all | 0.14 | 0.00 | 0.07 | −0.06 | −0.03 | 0.19 | 0.02 | −0.06 | 0.10 | 0.30 | 0.18 | 0.36 | 0.08 | −0.13 |
19. Previous investments Chinese firms—other sectors | 0.13 | 0.00 | 0.07 | −0.06 | −0.02 | 0.18 | 0.02 | −0.06 | 0.10 | 0.28 | 0.17 | 0.32 | 0.06 | −0.12 |
20. Previous investments Chinese firms—same sector | 0.12 | 0.00 | 0.03 | −0.03 | −0.02 | 0.07 | 0.03 | −0.05 | 0.04 | 0.14 | 0.09 | 0.19 | 0.09 | −0.05 |
21. Previous investments state-owned Chinese firms | 0.10 | 0.03 | 0.06 | −0.06 | −0.01 | 0.15 | 0.03 | −0.05 | 0.06 | 0.22 | 0.14 | 0.26 | 0.05 | −0.08 |
22. Previous investments private Chinese firms | 0.14 | −0.02 | 0.06 | −0.04 | −0.03 | 0.17 | 0.02 | −0.06 | 0.10 | 0.27 | 0.16 | 0.33 | 0.07 | −0.12 |
23. Previous investments state-owned Chinese firms—other sectors | 0.09 | 0.02 | 0.05 | −0.05 | −0.01 | 0.14 | 0.02 | −0.04 | 0.05 | 0.21 | 0.12 | 0.23 | 0.04 | −0.08 |
24. Previous investments private Chinese firms—other sectors | 0.14 | −0.02 | 0.06 | −0.04 | −0.02 | 0.14 | 0.02 | −0.07 | 0.09 | 0.24 | 0.16 | 0.29 | 0.05 | −0.10 |
25. Previous investments state-owned Chinese firms—same sector | 0.04 | 0.01 | 0.02 | −0.01 | −0.01 | 0.05 | 0.02 | −0.03 | 0.03 | 0.06 | 0.05 | 0.11 | 0.06 | −0.02 |
26. Previous investments private Chinese firms—same sector | 0.12 | −0.01 | 0.03 | −0.03 | −0.01 | 0.06 | 0.02 | −0.04 | 0.04 | 0.12 | 0.08 | 0.17 | 0.08 | −0.04 |
14. | 15. | 16. | 17. | 18. | 19. | 20. | 21. | 22. | 23. | 24. | 25. | 26. | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
14. Specialization—squared | 1 | ||||||||||||
15. Experience | 0.02 | 1 | |||||||||||
16. Global city | 0.02 | 0.12 | 1 | ||||||||||
17. Previous investments by non-Chinese firms in the same sector | 0.24 | 0.12 | 0.35 | 1 | |||||||||
18. Previous investments Chinese firms—all | 0.04 | 0.13 | 0.39 | 0.30 | 1 | ||||||||
19. Previous investments Chinese firms—other sectors | 0.02 | 0.08 | 0.37 | 0.26 | 0.94 | 1 | |||||||
20. Previous investments Chinese firms—same sector | 0.05 | 0.18 | 0.18 | 0.20 | 0.48 | 0.34 | 1 | ||||||
21. Previous investments state-owned Chinese firms | 0.03 | 0.10 | 0.36 | 0.24 | 0.72 | 0.70 | 0.33 | 1 | |||||
22. Previous investments private Chinese firms | 0.03 | 0.12 | 0.33 | 0.26 | 0.92 | 0.86 | 0.48 | 0.43 | 1 | ||||
23. Previous investments state-owned Chinese firms—other sectors | 0.01 | 0.08 | 0.34 | 0.23 | 0.68 | 0.71 | 0.25 | 0.94 | 0.41 | 1 | |||
24. Previous investments private Chinese firms—other sectors | 0.01 | 0.07 | 0.29 | 0.22 | 0.84 | 0.90 | 0.34 | 0.39 | 0.92 | 0.37 | 1 | ||
25. Previous investments state-owned Chinese firms—same sector | 0.04 | 0.11 | 0.10 | 0.11 | 0.23 | 0.15 | 0.48 | 0.32 | 0.15 | 0.14 | 0.14 | 1 | |
26. Previous investments private Chinese firms—same sector | 0.04 | 0.15 | 0.16 | 0.18 | 0.43 | 0.32 | 0.91 | 0.23 | 0.47 | 0.22 | 0.32 | 0.08 | 1 |
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De Beule, F., Somers, D. & Zhang, H. Who Follows Whom? A Location Study of Chinese Private and State-Owned Companies in the European Union. Manag Int Rev 58, 43–84 (2018). https://doi.org/10.1007/s11575-017-0330-2
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DOI: https://doi.org/10.1007/s11575-017-0330-2