Dual Agglomeration Effect And Outward Foreign Direct Investment Of China’s Firms

For the agglomeration phenomenon of OFDI of China’s firms, this paper, from the perspective of agglomeration economy, studies its role in promoting OFDI of China’s firms, trying to sort out the mechanism of promoting OFDI of China’s firms through a variety of home country agglomeration and host country agglomeration effect. This paper introduces the variable of dual agglomeration to the model of OFDI of heterogeneous firms to establish relevant mathematical model and derive the corresponding conclusions:1. Dual agglomeration effect can make some low productivity firms which cannot do OFDI originally began to OFDI.2. Relative to character, high productivity firms are more sensitive for host country agglomeration effect.3. Relative to character, low productivity firms are more sensitive for home country agglomeration effect.Based on China’s industrial enterprise database from 2005 to 2009 as sample, this paper does empirical test of the related conclusions through the probit probability measurement model. Main conclusions are as follows:1. Home country agglomeration and host country agglomeration have a significant role in promoting OFDI of subsequent firms, and the latter’s partial effect is bigger.2. From the absolute point of view, regardless of home country agglomeration or host country agglomeration, the higher productivity firms obtain the bigger promoting effect of OFDI. But relatively speaking, high productivity firms are more sensitive for host country agglomeration effect and low productivity firms are more sensitive for home country agglomeration effect.3. From the absolute point of view, regardless of home country agglomeration or host country agglomeration, the higher income firms obtain the bigger promoting effect of OFDI. But relatively speaking, high income firms are more sensitive for host country agglomeration effect and low income firms are more sensitive for home country agglomeration effect.4. The marginal effect of host country agglomeration is bigger for state-owned enterprises, and the marginal effect of home country agglomeration is bigger for non-state-owned enterprises.5. The marginal effect of investment in developed areas is greater than the marginal effect of investment in underdeveloped areas, regardless of home country agglomeration or host country agglomeration.Finally this paper puts forward several policy suggestions:1. The government should publish relevant policy, to give policy support for the agglomeration development of OFDI firms in a specific area.2. The government should encourage the local powerful firms take the lead in OFDI.3. Establishing information exchange platform between firms, to strengthen information sharing of "going out" firms.4. Setting up service institutions in the host country, to strengthen the management of the same host country investment.5. The government can give appropriate subsidies to some profitable SMES, to reduce their upfront "going out" costs.