Knowledge Transfer through Appropriate Location Selection: An Empirical Investigation in China

Fan Liang
University of Tasmania, Australia
Stephen Nicholas
University of Newcastle, Australia

ABSTRACT

This paper investigates the location determinants of foreign investors and how the location decision-making impacts on their knowledge transfer strategies. Survey data were collected in Yunnan, a southwest province of China. By examining two different sets of location factors at both the national and provincial levels, the research found that location factors at the provincial level, rather than at the national level, directly influenced foreign investors’ knowledge transfer strategies. The research also found that the support of Yunnan’s local government compensated for the underdeveloped endowment conditions of the province, significantly increasing knowledge transfer of foreign investors. The research suggests that foreign investors need to make appropriate location selection to efficiently exploit their ownership advantages. A well-structured policy regime is required of host countries in order to encourage knowledge transfer by foreign investors.

Keywords: Knowledge Transfer, Location Selection, Foreign Invested Firms, China