Abstract
This study examines 2,933 cases of Japanese investment in 27 provinces and regions in China to identify the role that policy determinants had in influencing the sub-national location decision of Japanese firms in China. The empirical results show that the Special Economic Zones (SEZs) and Opening Coastal Cities (OCCs) were a successful policy instrument initially, as SEZs and OCCs had a strong influence on Japanese foreign investment during the early years of China's liberalized foreign investment environment. Since the mid-1990s SEZs and OCCs have attracted proportionally less foreign investment as competition from other special investment zones has intensified in China. From these observations, we discuss the periodic influence of SEZs and OCCs and introduce and review the influence of newly emerging investment zones. We also draw inferences to the location choice literature in terms of understanding the variable influence of policy factors and traditional locational indicators as driven by temporal changes in investor motivations and preferences in a country.
Similar content being viewed by others
References
Bartik, T.J. (1985). “Business Location Decision in the United States: Estimates of the Effect of Unionization, Taxes and other Characteristics of States.” Journal of Business and Economics Statistics 3, 14-22.
Beamish, P.W. and H.Y. Wang. (1989). “Investing in China via Joint Ventures.” Management International Review29, 57-64.
Cheng, L.K. and Y.K. Kwan. (2000). “What are the Determinants of the Location of Foreign Direct Investment? The Chinese Experience.” Journal of International Economics 51(2), 379-400.
Chung, W. and J. Alacer. (2001). “Heterogeneous Investment Motives and Location Choice of Foreign Direct Investment in the United States.” Working paper, Stern School of Business, New York University, New York
Chung, W. and A. Kalnins. (2001). “Agglomeration Effects and Performance: A Test of the Texas Lodging Industry.” Strategic Management Journal 22(10), 969-988.
Contractor, F. (1991). “Do Government Policies toward Foreign Direct Investment Matter? An Empirical Investigation of the Link between National Policies and FDI Flows.” NCTC Current Series A, No.21. New York: United Nations.
Coughlin, C., V.T. Joseph, and V. Arromdee. (1991). “State Characteristics and the Location of Foreign Direct Investment within the United States.” The Review of Economics and Statistics 73, 675-683.
Dunning, J.H. (1993). Multinational Enterprises and the Global Economy. Don Mills, Ontario: Addison-Wesley Publishing Company.
Friedman, J., D. Gerlowski, and J. Silberman. (1992). “What Attracts Foreign Multinational Corporations: Evidence from Branch Plant Location in the United States.” Journal of Regional Science 32, 403-418.
Goddard, C. (1997). China Market Atlas: 1997 ed. Hong Kong: The Economist Intelligent Unit.
Goldberg, M. (1971). “The Determinants of US Direct Investment in the EEC: Comment.” American Economic Review 62, 692-699.
Grubert, H. and J. Mutti. (1991). “Taxes, Tariffs and Transfer Pricing in Multinational Corporate Decision Making.” The Review of Economics and Statistics 73, 285-293.
Hayter, R. and S.S. Han. (1997). “Reflections on China's Open Policy towards Foreign Direct Investment.” Regional Studies 32(1), 1-16.
Head, K.R., J. Ries, and D. Swenson. (1995). “Agglomeration benefits and Location Choice: Evidence from Japanese Manufacturing Investment in the United States.” Journal of International Economics 38, 223-247.
Henisz, W.J. and A. Delios. (2001). “Uncertainty, Imitation and Plant Location: Japanese Multinational Corporations, 1990-1996.” Administrative Science Quarterly, forthcoming.
Henley, J., C. Kirkpatrick, and G.Wilde. (1999). “Foreign Direct Investment in China: Recent Trends and Current Policy Issues.” The World Economy 22(2), 223-243.
Hill, S. and M. Munday. (1992). “The UK Regional Distribution of Foreign Direct Investment: Analysis and Determinants.” Regional Studies 26, 535-544.
Jia, Wei. (1994). Chinese Foreign Investment Laws and Policies: Evolution and Transformation. Westport, CT: Quorum Books.
Kotabe, M. (1993). “The Promotional Roles of the State Government and Japanese Manufacturing Direct Investment in the United States.” Journal of Business Research 27, 131-146.
Li, J.T. and O. Shenkar. (1997). The Perspectives of Local Partners: In P.W. Beamish and J.P. Killing (eds.), Cooperative Strategies: Asian Pacific Perspectives. San Francisco: New Lexington Press.
Lockett, M. (1987). “China's Special Economic Zones: The Cultural and Managerial Challenges.” Journal of General Management 12, 21-32.
Loree, D. and S. Guisinger. (1995). “Policy and Non-policy Determinants of US Foreign Equity Investment.” Journal of International Business Studies 26, 281-299.
Lu, J.W. (2000). “Characteristics and Performance of Japanese FDI in China.” Journal of Asian Business 16(3), 51-71.
Luger,M. and S. Shetty. (1985). “Determinants of Foreign Plant Start-ups in the United States: Lessons for Policy Makers in the Southeast.” Vanderbilt Journal of Transnational Law 18, 223-245.
Lunn, J. (1980). “Determinants of US Direct Investment in the EEC: Further Evidence.” European Economic Review 13, 93-101.
Luo, Y. (1995). “Business Strategy, Market Structure and Performance of International Joint Ventures: The Case of Joint Ventures in China.” Management International Review 35, 241-264.
Luo, Y. (1997). International Investment Strategies in the People's Republic of China. Dartmouth: Dartmouth Publishing Co.
Luo, Y. and N. O'Connor. (1998). “Structural Changes to Foreign Direct Investment in China.” Journal of Applied Management Studies7(1), 95-109.
Nachum, L. (2000). “Economic Geography and the Location of TNCs: Financial and Professional Service FDI to the USA.” Journal of International Business Studies 31(3), 367-385.
Pan, Y. (1996). “Influences on Foreign Equity Ownership in Joint Ventures in China.” Journal of International Business Studies 27(1), 1-27.
Reuvid, J. (1994). Doing Business with China. London: Kogan Page.
Scaperlanda, A.E. (1967). “The EEC and US Foreign Investment: Some Empirical Evidence.” Economic Journal 77, 22-46.
Schmitz, A. (1970). The Impact of Trade Blocs on Foreign Direct Investment. Economics Journal 80, 724-731.
Shaver, J.M. and F. Flyer. (2000). “Agglomeration Economies, Firm Heterogeneity and Foreign Direct Investment in the United States.” Strategic Management Journal 21(12), 1175-1193.
Smith, D.F. and R. Florida. (1994). “Agglomeration and Industrial Location: An Econometric Analysis of Japanese-Affiliated Manufacturing Establishments in Automotive-Related Industries.” Journal of Urban Economics 36(1), 23-41.
Toyo Keizai. (1999). Kaigai shinshutsu kigyou souran. Tokyo, Japan: Toyo Keizai.
UNCTAD. (1997). World Investment Report 1997. New York and Geneva: United Nations.
Woodward, D.P. (1992). “Locational Determinants of Japanese Manufacturing Start-ups in the United States.” Southern Economic Journal 58, 690-708.
Wu, C.N. (1958). Diguo zhuyi zai jiu zhongguo de touzi (Imperialist Investment in Old China). Beijing: Renmin Daxue.
Yamawaki, H., J. Thiran, and L. Barbarito. (1996). “Regional and Country Determinants of Location Decisions: Japanese Multinationals in European Manufacturing.” Paper Presented at the Academy of International Business Conference, Banff, Canada.
Yoshino, M. (1976). Japan's Multinational Enterprises. Cambridge, MA: Harvard University Press.
Zhao, H. and G. Zhu. (2000). “Location Factors and Country of Origin Differences: An Empirical Analysis of FDI in China.” Multinational Business Review 8(1), 60-73.
Author information
Authors and Affiliations
Rights and permissions
About this article
Cite this article
Zhou, C., Delios, A. & Yang, J.Y. Locational Determinants of Japanese Foreign Direct Investment in China. Asia Pacific Journal of Management 19, 63–86 (2002). https://doi.org/10.1023/A:1014839607180
Issue Date:
DOI: https://doi.org/10.1023/A:1014839607180