Investment location dynamics and influencing factors of pollution‐intensive industries in China: A study of chemical firms

Yinhao Wu, Changhong Miao, Yehua Dennis Wei and Jianming Miao

Growth and Change, 2021, vol. 52, issue 4, 1997-2015

Abstract: With rising environmental regulations and trade disputes, Chinese industries are facing tremendous pressures to restructure and relocate, and pollution‐intensive industries (PIIs) are undergoing particularly significant location adjustment. Scholars have proposed various location theories and econometric models to explain the investment location dynamics of PIIs. However, there are still some deficiencies in the analysis of effective factors, such as macroeconomic changes, uneven development, and enterprise heterogeneity. This paper aims to explore the influencing factors of PIIs location choice from multiple dimensions by integrating multiple location factors and incorporating the variables of temporal, spatial, firm heterogeneity and their interaction items into an econometric model. Based on the capacity investment database for Chinese listed chemical companies, we find that: (a) the investment of chemical firms in the central and western regions has significant regional proximity, while the investment in the eastern region shows a significant north‐south difference. (b) The macroeconomic situation measured by the industry climate index has the greatest effect, magnifies the influence of environmental regulation (ER) and expands the differences of investment location preferences between non‐stated‐owned enterprises (non‐SOEs) and state‐owned enterprises (SOEs), due to SOEs’ have undertaken more social responsibilities. (c) The agglomeration economy significantly increases the probability of investment in all regions, especially in the eastern region; non‐SOEs are more inclined to invest in the central and western regions than SOEs. We conclude that PIIs use a location strategy to adapt to the changing environment and that the effect of ER is mediated through ownership structure and local context.

Date: 2021
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