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Subnational-level government influence and FDI location choices: The moderating roles of resource dependence relations

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Abstract

By linking the resource dependence perspective with research on foreign direct investment location choices, we analyze how the dependence relationship between the home country of a multinational enterprise (MNE) and a subnational-level host location moderates the effect of local government enticement and deterrence signals on the MNE’s investment in a specific location. Specifically, we differentiate between two dimensions of the dependence relationship between an MNE home country and a subnational host location joint dependence and dependence asymmetry. Moreover, we examine the directionality of dependence asymmetry by distinguishing between the dependence advantage of a home country and that of a subnational host location. A sample of foreign manufacturing ventures across cities in China from 2003 to 2017 provides the empirical context for our investigation. Joint dependence and dependence asymmetry moderate the effects of local government signals on foreign investment location decisions. Although joint dependence enhances the positive effect of government enticement signals and mitigates the negative effect of government deterrence signals on foreign investments, dependence asymmetry affects the impacts of government enticement and deterrence signals differently, depending on which actor holds the dependence advantage.

Résumé

En reliant la perspective de la dépendance des ressources à la recherche sur les choix de localisation des investissements directs étrangers, nous analysons comment la relation de dépendance entre le pays d'origine d'une entreprise multinationale (Multinational Enterprise -MNE) et une localisation d'accueil infranationale modère l'impact des signaux d'incitation et de dissuasion du gouvernement local sur l'investissement de la MNE dans une localisation spécifique. Plus précisément, nous distinguons deux dimensions de la relation de dépendance entre le pays d'origine d'une MNE et une localisation d'accueil infranationale : la dépendance conjointe et l'asymétrie de la dépendance. De plus, nous examinons la directionnalité de cette dernière en distinguant l'avantage de dépendance du pays d'origine de celui d’une localisation d'accueil infranationale. Le contexte empirique de notre recherche se fonde sur un échantillon d'entreprises manufacturières étrangères dans différentes villes de Chine entre 2003 et 2017. La dépendance conjointe et l'asymétrie de la dépendance modèrent les impacts des signaux du gouvernement local sur les décisions de localisation des investissements étrangers. Bien que la dépendance conjointe renforce l'impact positif sur les investissements étrangers des signaux d'incitation du gouvernement et atténue l'impact négatif de ses signaux de dissuasion, l'asymétrie de la dépendance influence différemment les impacts des signaux d'incitation et de dissuasion du gouvernement, selon le type d'acteur qui détient l'avantage de dépendance.

Resumen

Vinculando la perspectiva de la dependencia de los recursos con la investigación sobre la elección del lugar de la inversión extranjera directa, analizamos cómo la relación de dependencia entre el país de origen de una empresa multinacional (EMN) y un lugar anfitrión a nivel subnacional modera el efecto de las señales de atracción y disuasión del gobierno local hacia la inversión de la EMN en un lugar específico. Específicamente, diferenciamos entre dos dimensiones de la relación de dependencia entre el país de origen de una EMN y un lugar anfitrión subnacional: la dependencia conjunta y la asimetría de la dependencia. Además, examinamos la direccionalidad de la asimetría de la dependencia distinguiendo entre la ventaja de la dependencia de un país de origen y la de un lugar subnacional anfitrión. Una muestra de empresas manufactureras extranjeras en distintas ciudades de China entre 2003 y 2017 proporciona el contexto empírico para nuestra investigación. La dependencia conjunta y la asimetría de la dependencia moderan los efectos de las señales del gobierno local en las decisiones de localización de la inversión extranjera. Pese a que la dependencia conjunta realza el efecto positivo de las señales de atracción del gobierno y mitiga el efecto negativo de las señales de disuasión del gobierno sobre las inversiones extranjeras, la asimetría de la dependencia afecta a los impactos de las señales de atracción y disuasión del gobierno de manera diferente, dependiendo de qué actor tiene la ventaja de la dependencia.

Resumo

Ao unir a perspectiva da dependência de recursos com pesquisas sobre escolhas de localização para investimento estrangeiro direto, analisamos como a relação de dependência entre o país de origem de uma empresa multinacional (MNE) e um local de acolhimento de nível subnacional modera o efeito de sinais de atração e dissuasão do governo local sobre o investimento da MNE em um local específico. Especificamente, diferenciamos duas dimensões da relação de dependência entre um país de origem de uma MNE e um local de acolhimento subnacional – dependência conjunta e assimetria de dependência. Além disso, examinamos a direcionalidade da assimetria de dependência distinguindo entre a vantagem de dependência de um país de origem e a de um local de acolhimento subnacional. Uma amostra de empreendimentos manufatureiros estrangeiros em cidades da China de 2003 a 2017 fornece o contexto empírico para nossa investigação. A dependência conjunta e a assimetria de dependência moderam os efeitos de sinais do governo local nas decisões de localização de investimento estrangeiro. Embora a dependência conjunta aumente o efeito positivo de sinais de aliciamento do governo e mitigue o efeito negativo de sinais de dissuasão do governo sobre investimentos estrangeiros, a assimetria de dependência afeta os impactos dos sinais de aliciamento e dissuasão do governo de forma diferente, dependendo de qual ator detém a vantagem de dependência.

摘要

我们通过将资源依赖观与外国直接投资位置选择研究联系起来， 分析了跨国企业 (MNE) 母国与东道国地方级位置之间的依赖关系如何调节地方政府对MNE在特定位置上的投资发出的吸引与威慑信号的影响。具体来说， 我们区分了MNE的母国与东道国地方之间的依赖关系的两个维度——联合依赖和依赖不对称。此外， 我们通过区分本国依赖优势与东道国地方的位置依赖优势来检验依赖不对称的方向性。2003 至2017 年间在中国各城市的外资制造企业的样本为我们的调查提供了实证情境。联合依赖和依赖不对称调节了地方政府对外商投资位置决策信号的影响。虽然联合依赖增强了政府吸引信号的积极作用并减轻了政府威慑信号对外投商资的负面影响， 但依赖不对称对政府吸引和威慑信号的作用产生了不同的影响， 这取决于哪个行为者拥有依赖优势。

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ACKNOWLEDGEMENTS

We sincerely thank Editor Yigang Pan and the three anonymous reviewers for their helpful comments on the paper. Luqun Xie is grateful for the financial support from National Natural Science Foundation of China, Grant No. 72002127. Jiatao Li is grateful for the financial support from the Research Grants Council of Hong Kong (HKUST# 16507219) and HKUST Institute for Emerging Market Studies (IEMS) Research Grant (IEMS21BM05).

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Authors and Affiliations

  1. Department of Business Administration, University of Illinois, Urbana-Champaign, 1206 S. Sixth Street, Champaign, IL, 61821, USA

    Fiona Kun Yao & Mingrui Xu

  2. Department of Information, Technology, and Innovation, Shanghai Jiaotong University, 1954 Huashan Road, Shanghai, 200030, People’s Republic of China

    Luqun Xie

  3. Department of Management, The Hong Kong University of Science and Technology, Clear Water Bay, Kowloon, Hong Kong

    Jiatao Li

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  1. Fiona Kun Yao
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Correspondence to Fiona Kun Yao or Luqun Xie.

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Accepted by Yigang Pan, Consulting Editor, 5 November 2022. This article has been with the authors for four revisions.

The original online version of this article was revised: In this article Luqun Xie should also have been denoted as a corresponding author; and the affiliation details for Luqun Xie were incorrectly given as “Department of Innovation and Strategy, Shanghai Jiaotong University, 1954 Huashan Road, Shanghai 200030, People’s Republic of China” but should have been “Department of Information, Technology, and Innovation, Shanghai Jiaotong University, 1954 Huashan Road, Shanghai 200030, People’s Republic of China”.

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Yao, F.K., Xie, L., Li, J. et al. Subnational-level government influence and FDI location choices: The moderating roles of resource dependence relations. J Int Bus Stud 54, 1027–1054 (2023). https://doi.org/10.1057/s41267-022-00591-x

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