MNC's location choice and agglomeration: a comparison between US and European affiliates in China

US and European multinational corporations encounter greater cultural barriers than Asian multinational corporations when investing in China, and the global economic recession further raises their location risks. Using data from the ‘2007 Fortune 500’ list, we conduct conditional logit estimations to test the main determinants of the choices made by 457 US and 537 European manufacturing affiliates located in China during the period 1995--2007, just prior to the economic crisis. Our main finding is that market size, production costs, agglomeration effects and geographical location impact significantly on both US and European firms' choices. Agglomeration is the preferred strategy of the sample firms. We also show that the host sector's technological intensity has a greater impact on US firms than on European ones.