Subnational-level government influence and FDI location choices: The moderating roles of resource dependence relations

Fiona Kun Yao (), Luqun Xie (), Jiatao Li () and Mingrui Xu ()
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Fiona Kun Yao: University of Illinois, Urbana-Champaign
Luqun Xie: Shanghai Jiaotong University
Jiatao Li: The Hong Kong University of Science and Technology
Mingrui Xu: University of Illinois, Urbana-Champaign

Journal of International Business Studies, 2023, vol. 54, issue 6, No 4, 1027-1054

Abstract: Abstract By linking the resource dependence perspective with research on foreign direct investment location choices, we analyze how the dependence relationship between the home country of a multinational enterprise (MNE) and a subnational-level host location moderates the effect of local government enticement and deterrence signals on the MNE’s investment in a specific location. Specifically, we differentiate between two dimensions of the dependence relationship between an MNE home country and a subnational host location joint dependence and dependence asymmetry. Moreover, we examine the directionality of dependence asymmetry by distinguishing between the dependence advantage of a home country and that of a subnational host location. A sample of foreign manufacturing ventures across cities in China from 2003 to 2017 provides the empirical context for our investigation. Joint dependence and dependence asymmetry moderate the effects of local government signals on foreign investment location decisions. Although joint dependence enhances the positive effect of government enticement signals and mitigates the negative effect of government deterrence signals on foreign investments, dependence asymmetry affects the impacts of government enticement and deterrence signals differently, depending on which actor holds the dependence advantage.

Keywords: FDI location choice; subnational government influence; signaling; resource dependence perspective; joint dependence; dependence asymmetry; mixed logit (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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DOI: 10.1057/s41267-022-00591-x

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