How Effective are Investment Promotion Agencies? Evidence from China

12 Pages Posted: 5 May 2017

See all articles by Bin Ni

Bin Ni

Toyo University - Business Administration

Yasuyuki Todo

Waseda University

Tomohiko Inui

Gakushuin University

Date Written: June 2017

Abstract

Using both firm‐level and city‐level data from the Chinese National Bureau of Statistics and unique information on investment promotion agencies (IPA) in China, the present paper evaluates whether IPA affect foreign direct investment (FDI) from the perspective of both intensive and extensive margins; that is, re‐investment by incumbent foreign‐owned firms and total new FDI inflows into the city, respectively. After controlling for potential determinants of FDI and correcting for biases due to endogeneity, we find that, in general, IPA do not necessarily increase FDI in either case. However, IPA are found to promote re‐investment by large foreign‐owned firms. The results imply difficulty in the dissemination of information about the business environment to foreign investors.

Suggested Citation

Ni, Bin and Todo, Yasuyuki and Inui, Tomohiko, How Effective are Investment Promotion Agencies? Evidence from China (June 2017). The Japanese Economic Review, Vol. 68, Issue 2, pp. 232-243, 2017. Available at SSRN: https://ssrn.com/abstract=2962720 or http://dx.doi.org/10.1111/jere.12089

Bin Ni

Toyo University - Business Administration ( email )

5-28-20 Hakusan
Bunkyo-ku
Tokyo, 112-8606
Japan

Yasuyuki Todo

Waseda University ( email )

1-104 Totsukamachi, Shinjuku-ku
tokyo, 169-8050
Japan

Tomohiko Inui (Contact Author)

Gakushuin University ( email )

1-5-1 Mejiro
Toshima-ku Tokyo 171-8588
United States

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