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Few prior studies have addressed how subnational differences within a country affect a firmʻs decision on location. We propose that two market constraints, product market constraints and factor market constraints reflect subnational differences in emerging markets, such as China. In addition, the effect of the investment experience of business group affiliated firms (BGAFs) has been neglected in prior studies on location. We propose that learning from the investment experience of other BGAFs in a specific subnational location could reduce the negative relationship between decision on a location and the extent to which they invest in it. Our data consists of Taiwanese firms doing business in China during the emergence of the new WTO institution in China.

Decisions on subnational locations in China during the early years of WTO membership: evidence from the experience of Taiwanese affiliates