Economics at your fingertips  

Running out of steam? A political incentive perspective of FDI inflows in China

Danqing Wang (), Zhitao Zhu (), Shuo Chen () and Xiaowei Rose Luo ()
Additional contact information
Danqing Wang: The Hong Kong University of Science and Technology
Zhitao Zhu: The Chinese University of Hong Kong
Shuo Chen: Fudan University
Xiaowei Rose Luo: INSEAD

Journal of International Business Studies, 2021, vol. 52, issue 4, No 7, 692-717

Abstract: Abstract Drawing on the sociological literature of state bureaucracy, we develop a political incentive perspective on FDI inflows. We argue that political term, as a core feature of career advancement in state bureaucracy, influences the incentives of newly appointed government officials and in turn their efforts toward achieving the state’s goal of attracting FDI. Due to the mandatory retirement age which limits the career advancement, officials in their first terms perceive that they have better chances of promotion and hence have stronger incentives to work toward advancement than those continuing to serve in the current position for the following term. We test this argument by examining Chinese city government leaders and FDI inflows in their cities from 2003 to 2010, using a difference-in-differences design. The results show that first-term leaders, who are newly appointed after political turnover, attract more FDI inflows than continuing leaders. The difference is smaller when the new leaders are close to retirement, but greater if they are appointed to cities with low prior GDP performance. This study offers a new perspective on intra-country FDI variations, and extends the literature on the role of political institutions by investigating the political incentives of government officials.

Keywords: bureaucracy; political incentives; FDI inflows; China; difference-in-differences (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link) Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from
http://www.springer. ... nt/journal/41267/PS2

DOI: 10.1057/s41267-020-00366-2

Access Statistics for this article

Journal of International Business Studies is currently edited by John Cantwell

More articles in Journal of International Business Studies from Palgrave Macmillan, Academy of International Business
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().

Page updated 2021-06-26
Handle: RePEc:pal:jintbs:v:52:y:2021:i:4:d:10.1057_s41267-020-00366-2