LOCATION DETERMINANTS OF FOREIGN LOGISTICS FIRMS IN CHINA: A DISCRETE CHOICE APPROACH JUNJIE HONG (Master of Economics, Nankai University, P.R.C.) A THESIS SUBMITTED FOR THE DEGREE OF PHD IN THE DEPARTMENT OF ECONOMICS NATIONAL UNIVERSITY OF SINGAPORE 2004 LOCATION DETERMINANTS OF FOREIGN LOGISTICS FIRMS JUNJIE HONG 2004 Acknowledgements As with any large project, this thesis is not accomplished without the help of many people. Firstly, I would like to take this opportunity to say thanks to my supervisor, Professor Chin, who has offered me great and very important support since the earliest stages of this work. His generous encouragement and rigorous guide leads to excellent thinking and doing, much more than what could be found in this piece of work. I am also grateful to Professor Tongzon, who read the manuscript and gave some helpful comments. The author is also very grateful to Professor Anming Zhang, Mark Goh and K. Raguraman for their insightful comments and suggestions, which are very important and valuable for improving the thesis. Some aspects of this thesis were presented at a conference held jointly by the National University of Singapore, Peking University and Tsinghua University. I am grateful to the participants for their constructive suggestions. An article partially drawn from this thesis was submitted to the Transportation Research Part E for review. I would like to thank Professor Wayne Talley and two anonymous referees for their suggestions and comments. A very special note of thanks and appreciation is due to my wife. She has given up her personal time and career to accompany and support me. Her understanding and encouragement always top me up with more strength to move on. Last but not least, I am grateful to all authors listed in the references. Their work is the base and foundation of this thesis. All of above-mentioned people deserve much credit for whatever merit this thesis contains. Any errors are, of course, the responsibility of the author. i LOCATION DETERMINANTS OF FOREIGN LOGISTICS FIRMS JUNJIE HONG 2004 Table of Contents Acknowledgements ….……………………………………………………………… i Table of Contents ……………………………………………………… .………… .…ii Summary…… …………………………………………………………… .………… vii List of Tables ……………………………………………………………………… .….ix List of Figures ……………………………………………… ……… ………… .……xii List of Abbreviations ………………………………………….…………… …… … xiii Chapter 1. Introduction …………………………… ………… …….……………….1 1.1 Literature Review ……………………….………………… ….……………… 1.2 Research Gaps ……………………………….………………… .…………… .3 1.2.1 Research Gaps on FDI Location in China …………….……… .……………….3 1.2.2 Research Gaps on Foreign Logistics Firms Location …….…… .…………… .4 1.2.3 Research Gaps on Firm-Specific Effect on FDI Location ….…… .…………….4 1.3 Objectives ………………………………………….……………… .………… 1.4 Contribution and Significance ………………….………………….… ……… .6 1.5 Scope of This Thesis …………………………… ………………….….……… 1.6 Outline of This Thesis …………………………….………….…….…….…… .7 Chapter 2. Literature Review …………………………….………….…….…….…….8 2.1 Theoretical Research on Firm Location …………… ………….…….………….8 2.1.1 Homogenous-Space Location Theory ………………… ……….…….…………8 2.1.2 Heterogeneous Space Location Theory ……………… ………….…….………11 ii LOCATION DETERMINANTS OF FOREIGN LOGISTICS FIRMS JUNJIE HONG 2004 2.2 Foreign Direct Investment …………………… …………… … .………………13 2.2.1 The Market Imperfections Approach ……….……….……… .…………… 13 2.2.2 Product Cycle Theory …………………………….….……… .…………… .14 2.2.3 Internalization Approach ……………………….…………………………… 14 2.2.4 The Eclectic Paradigm ………………………….…………………………… 15 2.3 Empirical Studies on Firm Location ………………….………………………… .16 2.3.1 Firm Location Decisions across Cities …………….………………………….16 2.3.2 Intra-metropolitan Location Decisions …………….………………………….18 2.3.3 Firm Specific Effects on Location Decision ……….………………………….19 2.3.4 Location of FDI in China ……………………….…………………………… 20 2.3.5 Location of logistics activities ………………….…………………………… 22 2.4 Conclusions ………………………………………… …… .…………………….22 Chapter 3. Review of Methodology …………………………… ………………….24 3.1 Tobit Model ……………………………………………………….……………….24 3.2 Poisson Model …………………………………………………….……………….25 3.3 Discrete Choice Model (DCM) …………………………………….…………… .28 3.3.1 Multinomial Logit Model (MNL) ………………….…………… .………… 29 3.3.2 Nested Logit Model (NL) ………………………….………………………… 30 3.4 Discrete Spatial Choice Model …………………… ….…………………………32 3.5 Conclusions ……………………………………………….……………………….34 Chapter 4. Some Background Information on Chinese Logistics .………….……35 4.1 Introduction of Chinese Logistics System ……………….……….……………… 35 4.1.1 Development of Logistics in China …………………………… …………… 35 iii LOCATION DETERMINANTS OF FOREIGN LOGISTICS FIRMS JUNJIE HONG 2004 4.1.2 Development of Logistics across Regions ……………………………………38 4.2 Logistics Service Providers in China …………………………………………… 43 4.3 Evolution of Logistics FDI Policies in China …………………………………….44 4.3.1 Evolution of Foreign Investment Policy …………………………………… .45 4.3.2 Specific Laws and Regulations on Foreign Logistics Investment ……………48 4.4 Foreign Logistics Firms in China: Statistics based on Census Data …………… .51 4.4.1 Some Descriptive Results …………………………………………………….53 4.4.2 Analysis of Variance across Regions …………………………………………58 4.5 Descriptive Statistics of Foreign Logistics Firms in Shanghai ………………… .60 4.5.1 General Firms-specific Characteristics ……………………………………….61 4.5.2 Analysis of Variance across Districts ……………………………………… .65 Chapter 5. The Location Determinants of Logistics FDI across Chinese Cities .68 5.1 Introduction ……………………………………………………………………….68 5.2 A Theoretical Model on Inter-City Distribution of Logistics Services ………… .70 5.2.1 The Demand for Logistics Services ………………………………………… .71 5.2.2 User’s Likelihood of Outsourcing …………………………………………….74 5.2.3 The Supply of Logistics Service ………………………………………………77 5.2.4 The Equilibrium Results ………………………………………………………85 5.3 Inter-City Locational Determinants of Logistics FDI …………………………….88 5.3.1 An Econometric Model ……………………………………………………… 88 5.3.2 Data Source and Explanatory Variables ………………………………………90 5.3.3 Conditional Logit Estimation Results and Discussion ……………………….101 5.3.4 Nested Logit Models and Estimation Results ……………………………… 112 iv LOCATION DETERMINANTS OF FOREIGN LOGISTICS FIRMS JUNJIE HONG 2004 5.4 Location Decisions of Logistics FDI: Time and Firm-Specific Effects ………….116 5.4.1 Review of Previous studies ………………………………………………… .116 5.4.2 Methodology ………………………………………………………………….119 5.4.3 Empirical Results on Time and Firm-Specific Effects ……………………….120 5.5 Conclusions ……………………………………………………………………….125 Chapter 6. Intra-metropolitan Location of Logistics FDI in Shanghai: Determinants and Patterns …………… .………………………………………………………… 127 6.1 Introduction to Shanghai ………………………………………………………….128 6.1.1. Spatial Restructure ………………………………………………………… 129 6.1.2. FDI in Shanghai ………………………………………………………………131 6.1.3. Logistics in Shanghai …………………………………………………………132 6.2 Intra-metropolitan Location Determinants of Logistics FDI …………………… .133 6.2.1 A Theoretical Model ………………………………………………………… 133 6.2.2 Econometric Models ………………………………………………………… 139 6.2.3 Implementation of the Model ………………………………………………….141 6.2.4 Conditional Logit Empirical Results and Discussion …………………………149 6.2.5 Nested Logit Estimation Results and Discussion …………………………… .152 6.3 Firm-Specific Characteristics and Intra-metropolitan Location ………………… .161 6.3.1 Methodology ………………………………………………………………… .161 6.3.2 Estimation Results and Discussions ………………………………………… .162 6.4 Conclusion …………………………………………………………………………165 Chapter 7. Conclusions and Implications ……………………… .……………… .168 7.1 Conclusions of This Thesis ……………………………………………………… 168 v LOCATION DETERMINANTS OF FOREIGN LOGISTICS FIRMS JUNJIE HONG 2004 7.1.1 FDI Location in a Transitional Economy …………………………………… .169 7.1.2 Location Behavior of Logistics Service FDI ………………………………… 170 7.1.3 Firm-Specific Effects on FDI Location Behavior …………………………… .171 7.2 Implications of This Thesis ……………………………………………………… .172 7.2.1. Implications for Researchers ………………………………………………… 172 7.2.2 Implications for Policy Makers ……………………………………………… .173 7.3 Limitation and Possible Extensions of This Research …………………………… 176 Bibliography ………………………………………………………………………… .178 Appendix A …………………………………………………………………………….199 Appendix B ………………………………………….…………………………………203 Appendix C ………………………………………….…………………………………204 Appendix D ………………………………………….…………………………………206 vi LOCATION DETERMINANTS OF FOREIGN LOGISTICS FIRMS JUNJIE HONG 2004 Summary Foreign direct investment (FDI) has played an increasingly important role in the economic growth in China. With the flow of FDI, the intense competition has led many foreign investors to explore new investment opportunities. One of these is the logistics industry. The Chinese logistics market is still in its infancy and thus creates tremendous opportunities for foreign investors. This sector has been recognized as an important driving force in the development of national economy and business given that several key cities aspire to be regional or international logistics hubs in China. One of the main tasks is to attract foreign logistics investment, a crucial element for a regional logistics hub. This thesis attempts to study the influence of site and firm-specific characteristics on location behavior of foreign logistics firms across cities as well as within a metropolitan area. Partial equilibrium models were developed to investigate how the profit level and distribution of logistics service providers across locations were determined, within a market structure of monopolistic competition. Based on this, discrete choice models were developed. 1775 (or 600) foreign logistics firms during the period of 1992 (or 1993) to 2001 were drawn from a recent census for the study of inter-city (or intra-city) firm location. Some empirical results have been derived. First, location determinants of foreign logistics firms across Chinese cities were examined. The results indicated that a large market size and good transport infrastructure attracted foreign logistics investment, but high labor and communication costs acted as deterrence. Foreign logistics investments favored a city with high market liberalization level, agglomeration economies and preferential government policies towards FDI. vii LOCATION DETERMINANTS OF FOREIGN LOGISTICS FIRMS JUNJIE HONG 2004 The importance of some location factors varied with firm-specific characteristics, such as the organization structure and source of country. Independent establishments favored the cities with free trade zones, while branch companies preferred the capital cities. Compared to overseas Chinese companies, firms from foreign countries were less sensitive to the availability of local information infrastructure. The impact of some site attributes was found to vary with time. The market liberalization level, roadway transportation and advantages in capital cities have become more important to foreign logistics firms in recent years. The location behavior of foreign investments within a metropolitan area was also investigated. The empirical results drawn from a study on Shanghai suggested that FDI favored locations close to Central Business District (CBD), seaport and airport. Other factors included urbanization, market size, market liberalization level, government preferential policy and availability of supporting services. The CBD’s attractiveness to foreign logistics investment decreased over time. The importance of site attributes on foreign logistics firms’ location in a city also varied with firms-specific characteristics. For instance, compared to those established before 1998, new firms preferred good roadway infrastructure but avoided the locations near HONGQIAO International Airport, which was converted to domestic airport status. To conclude, the location choice of foreign logistics firms is determined by the interaction of site attributes and firm-specific characteristics. Firms’ location preference was found to vary over time. Researchers and policy-makers should thus include the firm-specific effects in any attempt to understand the location behavior of foreign logistics providers. viii LOCATION DETERMINANTS OF FOREIGN LOGISTICS FIRMS JUNJIE HONG 2004 List of Tables Table 2.1 Determinants of location decisions from previous studies …………………17 Table 4.1 State-level authorities involved in logistics and their main functions ……….37 Table 4.2 Measures taken by some government authorities to develop logistics…….…37 Table 4.3 GDP in transport, storage, post and telecommunications in 2001……………39 Table 4.4 Logistics development strategies in some cities in China ………………….40 Table 4.5 Logistics parks to be established in Shenzhen……………………………… 42 Table 4.6 Realized foreign direct investments in various sectors ………………………48 Table 4.7 SCI code and industry type of logistics firms used in this research………… 52 Table 4.8 Geographical distributions of foreign logistics firms in China……………….54 Table 4.9 Type of ownership and regional source of observations…………………… 55 Table 4.10 Number of employees of observations (categorical data) ………………….56 Table 4.11 Organizational positions of observations ……………………………… .56 Table 4.12 Annual revenue of observations in 2001 (categorical data)…………………57 Table 4.13 Number of main businesses of observations……………………………… .57 Table 4.14 Main businesses of observations…………………………………………….58 Table 4.15 Firm age of respondents ……………………………………………….59 Table 4.16 Number of businesses of respondents ……………………………… .59 Table 4.17 Distribution of foreign logistics firms across districts in Shanghai … .62 Table 4.18 Number of employees of observations (categorical data) ………………….63 Table 4.19 Number of businesses of observations ……………………………… .63 Table 4.20 Main business of observations…………….…………………………………63 ix LOCATION DETERMINANTS OF FOREIGN LOGISTICS FIRMS JUNJIE HONG 2004 105-142. 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Zhang Le-Yin (2003). Economic development in Shanghai and the role of the state. Urban Studies, 40(8), pp. 1549-1572. 197 LOCATION DETERMINANTS OF FOREIGN LOGISTICS FIRMS JUNJIE HONG 2004 Zhao H and G. Zhu (2000). Location factors and country of origin differences: an empirical analysis of FDI in China. Multinational Business Review, 8, pp. 60-73. Zhou C., A. Delios and J. Yang (2002). Locational determinants of Japanese foreign direct investment in China. Asia Pacific Journal of Management, 19(1), pp. 63-86. 198 LOCATION DETERMINANTS OF FOREIGN LOGISTICS FIRMS JUNJIE HONG 2004 Appendix A Let’s investigate the situation when the representative logistics provider sets its output level in order to achieve profit maximization here. The profit maximization problem of the logistics service providers i could be described as m a x Π S ij = r j ( P ij S ' ij − P X x j ij ) (A.1) ' ij subject to X = ij c + c −σ S ij = ( P b Q j Y k S j = i j ' ij Pi j− ) / ( − σ ) S ≤ r ≤ b ≤ j S ' i j (A.2) (A.3) (A.4) ≤ ≤ σ ≤ c ≥ c ≥ Condition (A.2) represents the logistics firm’s production function, while (A.3) denotes the market demand for logistics service i, and (A.4) represents equality of the demand and supply of external logistics service. Since the constraints hold with equality, we can substitute the equations for Xij, Pij and Sij’ into the objective function. The problem reduces to choosing the single variable Sij: 199 LOCATION DETERMINANTS OF FOREIGN LOGISTICS FIRMS m ax Π S ij = r j k j P b Q jY −σ S σ ij JUNJIE HONG − r j Pxjc − r j k j Pxjc1 S ij 2004 (A.5) ij The first order conditions of (A.5) with respective to Sij is: ∂Π ij ∂ S ij = r j k j P b Q j ( − σ )Y − σ −1 ∂Y σ S ij + r j k j P b Q j Y ∂ S ij −σ σ S ijσ − − r j k j Pxj c1 = (A.6) From (A.6), we obtain P bQ j ( − σ )Y − σ −1 In order to derive ∂Y σ S ij + P bQ j Y − σ σ S ijσ − = Pxj c1 ∂ S ij (A.7) ∂Y in the left hand of (A.7), we recall and differentiate (4.2) (i is ∂Sij replaced by i’ to avoid confusion) with respect to Sij n ∂Y = ∂ S ij = = ∂ ( ∑ S iσ' j ) / σ i '= ∂ S ij σ σ n ( ∑ S iσ' j ) 1−σ σ i '= n ( ∑ S iσ' j ) i '= n ( ∂ ∑ S iσ' j / ∂ S ij ) i '= 1−σ σ ⎡ σ −1 σ −1 ⎤ ⎢ ∑ σ S m j ( ∂ S m j / ∂ S ij ) + σ S ij ⎥ ⎣ m ≠i ⎦ (A.8) 200 LOCATION DETERMINANTS OF FOREIGN LOGISTICS FIRMS JUNJIE HONG 2004 Given Chamberlin’s monopolistic competition, each firm’s output change will not affect the output of other firms in the sector. In equation (A.8), this assumption implies that ∂S mj / ∂Sij = . Therefore, the first term in the right hand is equal to zero and equation (A.8) becomes: n ∂Y σ −1 = S ij ( ∑ S iσ' j ) (1 − σ ) / σ ∂ S ij i '=1 (A.9) Substituting (A.9) into (A.7) leads to: PbQj (−σ )Y −2σ Sij2σ −1 + PbQjσY −σ Sijσ −1 = Pxj c1 (A.10) Combination of (A.10) and (A.3) results in Pij ( − σ ) ( S ijσ / Y σ ) + Pij σ = Px j c (A.11) Chamberlin monopolistic competition also assumes that the number of firms in the sector is so large that the influence of each firm on the total output in the sector is negligible, which implies that Sijσ / Y σ = . The first term in the left hand of (A.11) equals to zero. Therefore, equation (A.11) implies that in order to maximize its profit, the logistics firm should set its price level at Pij* = P x j c / σ (A.12) 201 LOCATION DETERMINANTS OF FOREIGN LOGISTICS FIRMS JUNJIE HONG 2004 Comparison of (A.12) and (4.22) indicates that we get the same conclusion that each logistics provider should charge its price at mark-up over the marginal cost in order to maximize profit. 202 LOCATION DETERMINANTS OF FOREIGN LOGISTICS FIRMS JUNJIE HONG 2004 Appendix B The models with all explanatory variables except those with highly correlated coefficients are given in Table B.1. Given the large number of explanatory variables, which are mutually correlated and a large number of choice alternatives (40 cities), it is not surprising that several parameter estimates have an unexpected sign. Moreover, further analyses show that these models are not robust. Table B.1 Estimation results with all explanatory variables except those with highly correlated coefficients Specification LFORALL1 LINDOUT1 LPRIVATE1 LPOPDEN LTECHPOP LTELEPH LWAGE LFDI LTERT BERTHDUM AIRDUM LROADEN LROADEN1 LRAIDEN1 OCC FTA CAPITAL Obs. ×Alt.a Log-L Res. Log-L ρ2 Adj.b Para. 0.34 0.28 -0.09 0.20 -0.31 B.1 t stat. 7.30*** *** 4.65 -1.04 3.47*** -3.00*** *** 0.48 10.44 0.11 0.64 0.61 5.52*** -0.35 -1.75* 0.38 5.62*** -0.07 -0.48 0.37 5.79*** 0.15 1.31 0.31 2.68*** 0.94 4.61*** 1775 ×40 -4564 -6548 0.303 B.2 B.3 Para. 0.26 T stat. 5.23*** 0.20 -0.07 0.13 *** 3.35 -0.77 2.25** 0.93 3.88*** 0.42 9.12*** -0.22 -1.39 0.61 5.45*** 0.09 0.48 0.20 3.33*** -0.20 -1.35 0.65 9.31*** -0.21 -1.87* 0.46 3.78*** 0.36 1.70* 1775 ×40 -4561 -6548 0.303 B.4 Para. T stat Para. T stat 0.36 0.16 -0.05 0.15 5.07*** 2.54** -0.61 2.49** 0.40 0.26 -0.004 0.24 -0.12 5.91*** 4.21*** -0.04 4.17*** -1.20 1.15 5.01*** 0.39 8.07*** 0.10 0.52 0.55 4.72*** 0.13 0.66 0.22 3.64*** -0.08 -0.57 0.71 9.47*** -0.24 -2.15** 0.75 5.49*** 0.09 0.43 1775 ×40 -4562 -6548 0.303 0.44 9.13*** 0.31 1.64 0.59 5.13*** -0.24 -1.24 0.34 5.07*** 0.19 1.48 0.42 6.12*** 0.04 0.39 0.62 4.66*** 0.55 2.82*** 1775 ×40 -4574 -6548 0.301 Notes: *, **, and *** denote significance at the 10%, 5% and 1% level respectively. a Obs. ×Alt denotes number of observations × number of choice alternatives. b The adjusted likelihood ratio index (ρ Adj.) equals to − [ L ( M ) − k ] / L ( ) , where L(M) is the model log-likelihood value, k is the number of parameters, and L(0) is the loglikelihood value with all coefficients equal to zero in the model. 203 LOCATION DETERMINANTS OF FOREIGN LOGISTICS FIRMS JUNJIE HONG 2004 Appendix C Table C.1. Attractiveness of Chinese cities to logistics FDI in 2001 based on specification City Shanghai Shenzhen Tianjin Guangzhou Qingdao Ningbo Zhongshan Dalian Xiamen Nanjing Compete 0.343480 0.105514 0.090438 0.054727 0.046211 0.040048 0.038250 0.031825 0.027718 0.025404 City Beijing Shenyang Haikou Fuzhou Shuzhou Foshan Zhuhai Wuxi Hanzhou Shantou Compete 0.025352 0.016237 0.014953 0.014886 0.012828 0.011322 0.010497 0.010432 0.009819 0.009643 City Yantai Nantong Jinan Zhenjiang Wuhan Dongguan Lianyungang Zhangjiang Jiangmen Yingkou Compete 0.008062 0.006611 0.005694 0.005493 0.004707 0.004494 0.004290 0.003029 0.002787 0.002611 City Chengdu Hefei Rizhao Chongqing Qingyuan Chaozhou Shaoguan Heyuan Kunming Wulumuqi Compete 0.002438 0.002211 0.001965 0.001549 0.001314 0.001244 0.001093 0.000411 0.000225 0.000189 * Compete denotes urban attractiveness to foreign logistics firms. Table C.2. Attractiveness of Chinese cities to logistics FDI in 2001 based on specification City Shanghai Shenzhen Tianjin Guangzhou Zhongshan Qingdao Ningbo Xiamen Dalian Zhuhai Compete 0.329192 0.114739 0.105933 0.057143 0.046991 0.046463 0.029804 0.024293 0.022223 0.021004 City Haikou Beijing Nanjing Shenyang Fuzhou Yantai Shuzhou Foshan Wuxi Shantou Compete 0.020254 0.017596 0.017344 0.015008 0.014415 0.01433 0.014235 0.011507 0.010933 0.009476 City Hanzhou Dongguan Zhenjiang Nantong Lianyungang Jinan Yingkou Jiangmen Wuhan Zhangjiang Compete 0.006969 0.006737 0.005857 0.005835 0.004774 0.004261 0.003355 0.003022 0.002941 0.002784 City Rizhao Hefei Chengdu Shaoguan Qingyuan Chaozhou Chongqing Heyuan Kunming Wulumuqi Compete 0.002676 0.001668 0.001318 0.001275 0.001174 0.000991 0.000856 0.000329 0.000171 0.000127 * Compete denotes urban competitiveness in attracting foreign logistics firms. 204 LOCATION DETERMINANTS OF FOREIGN LOGISTICS FIRMS JUNJIE HONG 2004 Table C.3. Attractiveness of Chinese cities in attracting logistics FDI in 2001 based on specification City Shanghai Tianjin Shenzhen Qingdao Guangzhou Ningbo Beijing Zhongshan Dalian Shenyang Compete 0.344187 0.107442 0.095055 0.063890 0.046530 0.043679 0.030726 0.028550 0.027648 0.021945 City Xiamen Shuzhou Nanjing Fuzhou Wuxi Yantai Hanzhou Zhuhai Foshan Zhenjiang Compete 0.018939 0.017758 0.017411 0.015186 0.013882 0.011822 0.009634 0.009319 0.008752 0.008377 City Jinan Yingkou Nantong Dongguan Lianyungang Haikou Wuhan Rizhao Shantou Jiangmen Compete City 0.007092 Hefei 0.006381 Chengdu 0.006016 Shaoguan 0.005327 Qingyuan 0.004557 Zhangjiang 0.004336 Chaozhou 0.004133 Chongqing 0.003707 Heyuan 0.003132 Wulumuqi 0.002978 Kunming Compete 0.002051 0.001683 0.001597 0.001324 0.001285 0.001202 0.001190 0.000553 0.000473 0.000250 * Compete denotes urban competitiveness in attracting foreign logistics firms. 205 LOCATION DETERMINANTS OF FOREIGN LOGISTICS FIRMS JUNJIE HONG 2004 Appendix D Table D.1 Estimation results of other selected specifications Specification ROADUM (1) 1.98 (4.24)*** (2) 1.32 (4.77) *** -2.12 (-11.14) *** -0.02 (-2.36)** P P P P RAIDUM P P DISPDAIR -0.09 (-6.57) *** -0.00 (-0.02) -0.12 (-9.61) *** -0.09 (-0.46) 0.68 (3.62) *** 0.97 (3.30) *** P P DISHQAIR DISPORT LALLEMP LPRIVATE P P P P P P Obs. ×Alt. Log-L Res. Log-L ρ2 Adj. b P P P P P P P P P P -1.05 (-8.89) *** 2.14 (12.85) *** -0.35 (-1.59) 0.32 (10.53) *** 600 ×18 -1188 -1733 0.314 -1.51 (-5.75) *** 0.30 (11.10) *** 600 ×18 -1154 -1733 0.334 P P P 0.16 (6.84) *** 600 ×18 -1154 -1733 0.334 a P P -0.45 (-5.17) *** 2.11 (12.19) *** P NTZ HOTEL P -2.99 (-13.13) *** -0.06 (-5.70) *** -0.19 (-9.09) *** P P LPOPDEN (3) P P P P P P P P P P P Notes: *, **, and *** denote significance at the 10%, 5% and 1% level respectively. t statistics are in parentheses. a Obs. ×Alt denotes number of observations × number of choice alternatives. b The adjusted likelihood ratio index (ρ Adj.) equals to − [ L ( M ) − k ] / L ( ) , where L(M) is the model log-likelihood value, k is the number of parameters, and L(0) is the loglikelihood value with all coefficients equal to zero in the model. P P P P P P P P P P P P 206 [...]... LOGISTICS FIRMS JUNJIE HONG 2004 investigating the influence of site and firm-specific characteristics on the location choice of foreign logistics firms 1.3 Objectives This thesis aims to investigate the location behaviors of foreign logistics firms in China The author attempts to: • Investigate the location behavior of foreign investments across cities as well as in a metropolitan area in a transitional... literature review Chapter 3 introduces discrete choice approach - the methodology used in this research Chapter 4 provides some important background information concerning Chinese logistics Chapter 5 investigates inter-city location determinants of foreign logistics firms in China Chapter 6 focuses on intra-metropolitan location choices of foreign logistics firms in a Chinese city – Shanghai The last... data (Wei et al 1999; Coughlin and Segev 2000; Cheng and Kwan 2000; Sun and Parikh 2001) and city-level statistical data in China (He 2002, 2003) Only several studies were based on firm-level data (Chen 1996; Head and Ries 1996) 1.2 Research Gaps 1.2.1 Research Gaps on FDI Location in China The study on FDI location in transitional economies is at its infancy Existing analyses on FDI in China are based... suggest that some conclusions obtained in a certainty world can be generalized in an uncertainty framework Hsu and Tan (2000) employed a unifying approach to examine the exclusion theorem in a Weberian space under various types of uncertainty They concluded that (1) in a Weberian triangle, a firm would never find an intermediate location optimal; (2) Whether an interior location was optimal depended... understand the location behavior of foreign investments in a transitional economy; (2) to capture location determinants of foreign logistics providers; and (3) to draw some conclusions on the impact of firm-specific characteristics on location choices of foreign investors Some logistics services provided by local firms in China are undependable and unresponsive (Carter et al 1997) Therefore, attracting foreign. .. structural tree of 40 cities in China …………………………113 Figure 6.1 Urban spatial restructuring plan of Shanghai …………………………130 Figure 6.2 Central city area and other areas of Shanghai …………………………… 142 Figure 6.3 Districts in central city area of Shanghai ………………………………….143 Figure 6.4 Nested structural tree of logistics FDI location in Shanghai …………152 Figure 6.5 Variation of area competitiveness in attracting logistics. .. of previous studies concerning FDI location in China emphasized the inter-city location This research could enrich the literature by studying intra-metropolitan location of foreign investment Moreover, there are some characteristics associated with a transitional economy, such as market liberalization This research attempts to investigate the impact of these factors • Investigate location choices of. .. advantages, namely ownership, internalization and location advantages Ownership advantages are firm-specific advantages generated from resources owned by a firm Internalization advantages are possessed by the MNE when it internalizes some activities instead of purchasing them from the market Location- specific advantages are specific to a site, such as resources, networks, and institutional structures If an enterprise... specifically, foreign wholly owned firms put more emphases on international transport and communication costs compared to joint ventures The means of labor supply and infrastructure are significantly higher for acquisition mode compared with green field mode Larger firms appear to be attracted more by availability of low cost inputs, incentives and tax advantages 2.3.4 Location of FDI in China The massive... investment and empirical studies on firm location Some conclusions are drawn at the end 2.1 Theoretical Research on Firm Location Location theories fall largely into two categories: location in homogeneous space and location in heterogeneous space (Mathur, 1979) In the former, consumers are assumed to distribute evenly in space Demand is an intrinsic part of market area In the case of heterogeneous space, market . in China are based on aggregate statistical data, and are unable to shed light on 3 LOCATION DETERMINANTS OF FOREIGN LOGISTICS FIRMS JUNJIE HONG 2004 the influence of firm-specific characteristics level, roadway transportation and advantages in capital cities have become more important to foreign logistics firms in recent years. The location behavior of foreign investments within a metropolitan. force in the development of national economy and business given that several key cities aspire to be regional or international logistics hubs in China. One of the main tasks is to attract foreign