Empirical Study On The Interactive Relationship Between Henan’s FDI And Agglomeration

Since Krugman proposed a new economic geography theory, the impact ofeconomic globalization on the industrial pattern has become one of hot topics ofindustrial economics and regional economics. As a typical capital flow form under thetrend of economic globalization, foreign direct investments effect the formation and thedevelopment of the industrial clusters significantly. Henan Province, as a representativeprovinces undertaking the industry of the east part part transfers in the Midwest China,benefit from the promotion from the construction of economic zones in central plains tonational strategy, thus drawing mor foreign capital inflows. This article, based on thestatus of development of the FDI and industry clusters in Henan province, attempts toexplore the relationship between the theoretical conclusion and empirical analysis. Firstly,through the review of the industry clusters and its development theory based on FDI, thisarticle put forward the theoretical mechanism of interaction between FDI and industrialclusters. Secondly, on the basis of the analysis of the current development of the FDI andindustrial clusters in Henan Province, this article conduct the empirical analysis of therelationship between FDI and the industrial clusters by calculating location entropy of35industries in double-digit and adopting the area industrial proportion of18cities overprefecture level in Henan Province. The quantitative analysis based on panel data showsthat there are benign and interactive relationship between FDI and industrial clusters nomater it is single department agglomeration based on lacation entropy ormulti-department agglomeration based on the area industrial proportion. The empiricalresults fully confirm the theoretical parts: foreign direct investment promote theformation and development of industrial clusters and the agglomeration advantages of industry clusters attract a new round of foreign capital inflow. Besides, time-seriesvariables of the four competitive industries was selected from the samples forcointegration-Granger causality test, the test results indicate a causal relationshipbetween FDI and agglomeration in some industries is significant. Finally, on the basis ofthe theoretical research and empirical analysis, this article propose some politicalsuggestion on how to utilize foreign investment to promote the industrial clustersdevelop faster and to promote the upgrading of industrial structure.