A Study Of Agglomeration Effects Of FDI Location Choice In Shandong Province

In this paper, based on analyzing the data of foreign direct investments in Shan dong province, it is obvious that there are three features of the distribution of foreign direct investments. First, the regional distribution of FDI presents a high degree of agglomeration in the eastern coastal city, while relatively smaller in Midwestern cities. Second, the distribution of FDI within industries of Shandong province is also uneven, with obvious industrial agglomeration characteristics. The FDI is mainly concentrated in the secondary industry, especially in the manufacturing sector, followed by the tertiary and primary industry. Moreover, the FDI in the tertiary industry grows faster than the primary and secondary industry. Third, the FDI in Shandong appears a particular source of agglomeration. The main sources of FDI include Korea, Hong Kong, Japan, the United States, Taiwan and Singapore. Due to the agglomeration phenomena of FDI distribution and the inadequate research on relationship between FDI location choice and agglomeration effect, we use Spatial Gini coefficient and Location entropy index to measure the spatial agglomeration and particular source of agglomeration, and analyze the industrial agglomeration of FDI in Shandong. In order to test the effects of agglomeration on FDI location choice of Shandong, Firstly, we use the data of FDI of Shandong in1986-2012for time series analysis. Secondly, based on the FDI panel data of17cities of Shandong province from2003to2012, partial adjustment model has been used to set up a regression equation and conduct an empirical test. The final result indicates that agglomeration effect is the most essential determinant of FDI location choice in Shandong. In the meantime, the agglomeration effect in Shandong contributes to attracting more and more FDI, which also leads to an unequal distribution of FDI. In the context of a global economic downturn and a fierce competition in attracting investment, this paper has a certain theoretical and practical significance in conducting the use of agglomeration effect to attract FDI in Shandong province.