ABSTRACT
This chapter focuses on studying the spatial mechanism of foreign direct investment commitment. The key question is what makes foreign investors choose some cities over others as the locations for their intended production. Four variables can be related to the size of a city. They are urban population (URBANPOP), RETAIL, OUTPUT, and market potential (MP), which reflect city size based on population, retail markets, scale of manufacturing activity, and MP. Urbanization in a city is captured by URBANPOP%, the percentage of population living in the urban district. The size of a city’s economy and the level of industrialization are not the only aspects of an economy that may be relevant to foreign investors. Cities are also classified into four groups by four distance variables: DCPORT, DCCOAST, DCINLAND, DCREMOTE. Higher percentages of cities found closer to the coastline were foreign direct investment recipient cities.
