FDI Location and the Relevance of Spatial Linkages: Evidence from Provincial and Industry FDI in China
Format of Original
Review of International Economics
In this study both aggregate and industry-level foreign direct investment (FDI) data are employed to investigate the spatial dependence of FDI hosts. The analysis contributes to the existing literature by focusing on the heterogeneous spatial correlation of FDI in different industries. Using more comprehensive FDI data across multiple industries and multiple provinces in China from 1999 to 2007, the results show a significant spatial correlation among provinces. Aggregate FDI tends to be regional trade platform oriented indicating neighboring provinces become competitors for FDI. In contrast, results based on industry-level provincial FDI show stronger support for vertical or complex vertical FDI.