Analysis On Industrial Agglomeration To FDI-empirical Proof From Manufacturing In Shandong Province

The southeast littoral represented by Zhujiang delta is the most developing region in economy of our country. This region attracted amounts of FDI as well as formed the earliest domestic industrial clusters. Therefore, the regional economics development fact tells us that industrial agglomeration, which is the continuance impetus, and FDI are certainly to have something in connection: does the agglomeration attract FDI or the FDI cause concentration? Although the theories themselves have few things related at the very beginning, more and more scholars found and demonstrated their close relationship as the development of economic globalization. From the view of industrial agglomeration, there are researchers who paid attentions to the outside connections of it and perfected the notable diamond model by including the multinational activities. They suggested that multinational enterprises could play a leading role in clusters and FDI helped to form industrial agglomeration. However, from the other point of view, in terms of FDI, scholars empirically demonstrated that industrial agglomeration and its effect-agglomeration economy had played an obvious role in location determination of FDI by doing research on the location choice of FDI.After examining the existing related literature, this paper concluded that industrial agglomeration had positive influences in attracting FDI. However, different from location choice theory, this paper made research mainly in terms of the industrial choice. With deep analysis of the relationship between the theories of agglomeration and FDI in nature, we concluded that, industrial agglomeration could improve the quantity of FDI. Using twenty-eight sub-industries' data of manufacturing in Shandong province, this paper set up theory model and proved that the data fit the theory model very well.There are four main innovative points in this paper. Firstly, I indicated that industrial competitive advantage was the essential hinge that connected industrial agglomeration with FDI. Secondly, I combined the senior elements of industrial competitive advantage with the created assets searched by FDI, and analyzed the relationship between industrial competitive advantage and FDI particularly. Thirdly, using relative data on manufacturing in Shandong Province, I set up panel data model to do empirical analysis. Fourthly, the empirical research of FDI was introduced into the field of industrial choice by using substitute data technically.The main conclusions of this paper are as followed: First, there are fine interactive relationships between industrial competitive advantage and FDI. Thus, the inflow of FDI can improve the level of industrial competitive advantage, which could better attract FDI in return. Second, industrial agglomeration has effect on the inflow of FDI, and this affection is realized by industrial competitive advantage. Third, the agglomeration of manufacturing in Shandong Province has attained to some extent, and data proved that the higher the level of agglomeration, the more inflow of FDI.The conclusion that industrial agglomeration can attract FDI has important policy meanings to developing countries such as China. As the favorable policies do not have much affection on FDI, we should take industrial agglomeration as a new measure of attracting FDI. Therefore, I suggested in this paper that we should make connections between industrial policy and FDI policy, thus attracting FDI by competitive advantage and improving agglomeration by FDI.