Analysis On The Effects Of Market Factors On The Location Of Multinational Enterprises

With the economic integration processing and the new development of international production, multinational enterprises have been largely in control of international trade, international investment, technology transfer and so on. And multinational enterprises have gradually become a major force affecting the world economy than trade in some aspects of supplying goods and services to foreign markets and strengthening the international market ties. As an important branch of economics, the New Economic Geography is a good method to study the location of multinational enterprises with the hypothesises of monopolistic competition, economies of scale and transportation costs. Therefor, based on the New Economic Geography, this thesis studies the effect of market factors on the multinational enterprises'location choice from three points of view, such as trade effects, home market effects and market linkage effects.Based on the theories and literature review, first of all, the thesis separately analysed the impact mechanism of the products differentiation, trade cost, market linkage and local market demand on location choice of multinational enterprises. The conclusion shows that, products differentiation will lead to open competition, and agglomeration further, which have an effect on location choice; high trade costs will make the multinational enterprises choose the location close to consumers, and low trade costs will lead to agglomeration; the intermediate goods market association, established between the upstream and downstream enterprises of different industries, will affect the location decision-making; the local market demand will reduce the company's transportation costs, thus affect the location of multinational enterprises.Based on the mechanism analysis, from the three points of view, such as trade effect, home market effect and the linkage effects, this thesis conducts an empirical analysis on the impact of product differentiation, trade costs, market linkages, local market demand and other factors on multinational location. First, starting from the DSK model, this section analyzes the trade effects through local products demand and price index. The conclusion shows that, market scale will affect the location choice; products differentiation will decrease the price index, and enlarge the market demand, which attract more enterprises here. Second, the thesis analyzes the impact of home market effect on multinational enterprises from the DSK model and empirical analysis, and the conclusion shows that, the home market effect affects the multinational enterprises choice through "market access effect" and "market congestion effect". The change of the enterprises distribution will reduce the high-scale region price index, increase market demand, which have great attractions to enterprises; enterprises access leads a great variety of products fragment, and thus reduces the profits. Lastly, this section analyzes the the impact of market linkage effect on location choice. Based on theoretic analysis, this thesis measures the the manufacturer linkage index and FDI linkage index, and analyzes the impact of market linkage on the location choice. The results show that, because the manufacturer linkage can strengthen the linkages between forward and backward industries, reduce the cost linkage, and bring strong technological spillovers and collective efficiency, the enterprises can make a greater profit with a lower cost, which is a key factor in the location choice. With the limited market demand, FDI will intensify the market competition, and the "competition effect" is greater than "demonstration effect", which bring a negative effect on the multinational enterprises'location choice.On the above basis, this thesis finally revealed the main conclusions, and put forward some suggestions on attracting multinational enterprises to enter China, and driving China's big enterprises "Going out", which will impel China's economic development.