Acta Geographica Sinica ›› 2011, Vol. 66 ›› Issue (12): 1669-1681.doi: 10.11821/xb201112008

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Geography of Multinational Corporations in China: An Empirical Study of Fortune Global 500 Multinational Corporations in Electronics and Medical and Chemical Industries

HE Canfei, XIAO Xiaojun   

  1. College of Urban and Environmental Sciences, Peking University, Beijing 100871, China
  • Received:2011-05-17 Revised:2011-08-10 Online:2011-12-20 Published:2011-12-20
  • Supported by:

    National Natural Science Foundation of China, No.40871065

Abstract: As transportation and communication technologies develop, multinational corporations are motivated to split different functions along the value chain across locations. Following China's gradual open door policy, multinational corporations (MNCs) have taken an evolutionary approach to enter the Chinese market, gradually increasing their resource commitments and expanding their geographies as they gain local knowledge and develop capabilities in host economies. As a consequence, the geographical agglomeration of foreign investments in China can be understood by the location and co-location of different functions invested by MNCs sequentially. Based on data from the Fortune Global 500 MNCs in electronics and medical and chemical industries investing in China during 1979-2008, this study found that MNCs have gradually expanded in China functionally and geographically. Statistical results suggest that sequential investments have led to the spatial clustering of MNCs' functions in both industries. MNCs from the same country tend to agglomerate in the same cities and there are substantial cross-functional agglomeration effects. Market potential and political status are additional attraction to MNCs' investments. MNCs attach greater importance to agglomeration effects more than institutional advantages. The empirical results indicate that globalization force is a critical factor in restructuring the Chinese urban system, upgrading the functions of top tier cities and enhancing the control power of top cities.

Key words: Fortune Global 500 MNCs, multinational corporations, sequential investment, functional location, conditional Logit model