Agglomeration Economies, FDI Spillovers and Enterprise Productivity

This article tests the significance of agglomeration economies and FDI spillovers to the productivity improvement of selected large manufacturing enterprises in China. Based upon information on the 50 largest industrial enterprises in terms of sales revenues in each province in 2000, this study confirms the argument that agglomeration economies could positively contribute to the production efficiency of large manufacturing enterprises. A large enterprise has higher sales revenue per employee if it is located in a large city with strong presence of foreign enterprises. A large enterprise also performs better if it belongs to a highly geographically concentrated industry. This result indicates that the production efficiency of the large manufacturing enterprises is not only determined by the firm level factors but also by the location factors. The result could shed some light on the firm migration issue.