Location choice of multinational enterprises in China: Comparison between Japan and Taiwan

This paper explores the location choice of multinational enterprises (MNEs) in China, shedding special light on the role of agglomeration of same-nationality firms. We examine how this role differs according to firms' productivity. Furthermore, we compare the location choice of Japanese and Taiwanese MNEs in China, taking into consideration that Taiwanese MNEs experience less uncertainty in investing in China due to Taiwan's linguistic and cultural advantages. When considering firms' productivity, we find that less productive Japanese firms prefer to locate close to larger same-nationality agglomerations while there are no differences in location choices in the case of Taiwanese firms.