Modeling the location choices of foreign investments in Chinese logistics industry

Abstract

This paper attempts to identify the location determinants of foreign investment in the Chinese logistics industry. Based on a theoretical model, a nested logit model is introduced and estimated using data on 1775 foreign logistics establishments. We find that large market size attracts foreign investment, but high labor costs act as a deterrent. Good transportation infrastructure and high labor quality are positive factors. Logistics entrants prefer cities with many existing logistics providers, confirming the existence of service agglomeration economies. Capital cities attract more logistics investment, but there is no evidence that special economic zones and open coastal cities have significant advantages in attracting logistics investment. © 2006 Elsevier Inc. All rights reserved.