This research draws on theoretical arguments from economic sociology to explain the effects of co-ethnic foreign direct investment (FDI) agglomerations on the subnational location choices and within-country expansion patterns of Japanese multinational enterprises (MNEs) in China. Using a large longitudinal dataset in combination with mapping techniques from geo-visualization, we distinguish between subnational “core” and “periphery” investment locations, based on the agglomeration of Japanese FDI. We find that for Japanese MNEs, the subnational-level distinction between core and periphery locations matters. Specifically, initial entry in a core location increases the likelihood that a MNE will choose core locations for its subsequent within country expansion. Moreover, initial entry in a core location accelerates the pace at which MNEs establish additional subsidiaries in China. Finally, we find that despite major efforts by the Chinese government to attract FDI beyond core locations, the propensity of Japanese MNEs to enter China through co-ethnic core locations has increased over time.
Work in progress together with M. Stallkamp, B. Pinkham, & O. Buchel