Digital Economy and Foreign Direct Investment Location Choice: Evidence from Chinese Cities

Ziang Qiu, Baibing Huang and Yang Zhang ()
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Ziang Qiu: Faculty of Business Administration, University of Macau
Baibing Huang: School of Liberal Arts, Macau University of Science and Technology, Macao SAR, China
Yang Zhang: Faculty of Business Administration, University of Macau; Asia-Pacific Academy of Economics and Management, University of Macau, Macao SAR, China

No 202642, Working Papers from University of Macau, Faculty of Business Administration

Abstract: The development of the digital economy has the potential to impact resource allocation efficiency within a region. This study examines the direct and spatial effects of digital economy development on the location choice of foreign direct investment (FDI) in Chinese cities. The findings indicate that digital economy development not only enhances the inflow of foreign direct investment within a region but also influences FDI inflows in neighboring regions, with spillover effects diminishing as geographical distance increases. To address endogeneity concerns, staggered Difference-inDifferences (DID) and spatial DID models are introduced in an event study to validate our main findings. Moreover, regional heterogeneity analysis reveals that the impact of digital economy development on FDI location decisions is particularly significant in eastern and coastal cities. The results offer an empirical foundation for emerging market countries, such as China, to advance sustainable digital economy development, enhance resource allocation efficiency, and support foreign investors in making informed investment location decisions.

Keywords: Digital Economy; FDI Location; Spatial Effect; Spillovers; Emerging Markets (search for similar items in EconPapers)
JEL-codes: F23 O33 R12 (search for similar items in EconPapers)
Pages: 56 pages
Date: 2026-07
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Published in UM-FBA Working Paper Series

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