Working Paper

Factors Affecting Location Decisions of the Economic Headliners – Exporters and Foreign-Owned Firms – in China

Kiel Working Papers, 1645

Foreign-owned firms are frequently viewed as an important source of new capital, access to world

markets and employment generation and there exist numerous studies on the determinants of FDI

flows and the role of incentives designed to attract FDI. Similarly important for economic growth are

exporters, yet the factors that play a role in their location decisions have not been identified. Using a

data set of 1,409 firms in China who report, among other things, why they have chosen a particular

location, we find that the perceived importance of various site attributes differs considerably for those

two types of firms: foreign-owned firms are attracted by the local market size, supply of skilled

workers, and the quality of (telecommunications!) infrastructure; future exporters are driven by low

rents, and fewer regulatory requirements and taxes; both types of firms care about the availability of

government services


Natalia Trofimenko


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