How FDI attracted? A Congurational Analysis for Regional Competitiveness in Mechanism of FDI Entry and Exit: Evidence from China

The economic benets and spillover effects from FDI could lead accelerating the innovation of local economy and technological concept, which make it welcome in underdeveloped countries' authorities. This paper focuses on the entry and exit mechanism of FDI in 31 provinces of China from 2001 to 2016. The optimized diamond model associated with multi-theoretical cooperation is adopted to set up the regional competitiveness conguration for attracting FDI. It revealed that FDI attempts to enter regions with certain economic basis and favorable government conditions; but if the market uctuates, even if there are favorable policy conditions, FDI will restructure because of their prot-seeking. Based on the conclusions, local governments can use the minimum resources to attract FDI in appropriate circumstances, and can optimize policies in time when it is not suitable for the entry and maintenance of FDI, so as to focus on develop local markets.


Introduction
Signi cance of FDI Direct nancial interest: Foreign direct investment (FDI) is mainly in the form of capital investment. Largescale multinational enterprises can promote the local manufacturing industry, service industry and provide the opportunities of employment (Liu, Agbola and Dzator, 2016). FDI could engage in the elds which local enterprises never involved in. Because most transnational corporations (TCs) have abundant capital, perfect management and advanced technology (Buckley and Wang, 2007;Wang and Wu, 2015), these conditions signi cantly accelerate the development of local market and increase business competition (Wen, 2014). While bringing a lot of capital, cash ow and investment to this region, TCs will also promote the technology introduction and industrial structure improvement of the local industry, which has an important role in improving local production e ciency and increasing economic income. Spillover effect: The spillover effect of FDI mostly appears in the non-economic eld. For example, because transnational corporations have rich experience in international trade, they will pay special attention to local laws, regulations and policies, and such operation experience could promote the establishment and improvement of local market-economy mechanism, laws and statutes (Cheung, 2010; Xiao and Park, 2017), so as to better integrate the region into the international trade. For the local government, in order to achieve the goal of attracting FDI, it is bound to optimize and improve the administrative e ciency (Zhang, Guo and Wang, 2014).
Although FDI may aggravate industrial competition, foreign corporations' monopoly and other possible adverse factors (Jeon, Park and Ghauri, 2013), yet the government is fully capable of making relevant measures to offset such adverse factors (e.g. General Clause 301 of Trade Act of 1974 in the USA).
To sum up, the favorable effect of FDI on the market is far greater than the unfavorable, which is the principal consideration why a large number of scholars study on FDI. The research on FDI is generally based on the following theories.
Literature about FDI Sociology In perspective of Social Factors, the foreign direct investment (FDI) and Social Factors are of mutual promotion and unity (Inekwe, 2013). Studies have shown that, in underdeveloped countries, FDI can alleviate wage inequality between skilled and unskilled labor, however, FDI-led skill-biased technical change have a negative impact on employment. Meanwhile, the labor cost reduction caused by low employment rate stimulates FDI from Transnational Corporations (TCs) and makes a positive impact on employment (Tomohara and Yokota, 2011). In perspective of Politics, Gopalan, Hattari and Rajan (2016) showed that FDI wound only be concentrated in free and open market. On the contrary, Gaeseong Industrial Complex in North Korea (the most centralized country) attracts and retains extensive TCs' FDI (Kim, 2016). Lacking FDI's antecedents and existing inconsistency of research conclusions demonstrate that we need a more systematic and comprehensive evaluation system for mechanism of FDI variations (the entry and exit of FDI).

Management
In parallel with Sociology, Management research focuses on the strategic management and decision-  (Shepotylo and Oleksandr, 2012;Wang et al., 2017). It suggests that FDI variations depend on regional competitiveness which is also closely related to regional distribution of FDI. For regional differences, it's hard to nd a proper measure or index for regional competitiveness, even in the same host country Economic Geography In parallel with above theories, Economic Geography focuses on isolating the most in uential regional factors from a mount of visual data (Cui et  Traditional economic analysis focuses on economic data (e.g. GDP etc.) to establish a speci c analysis model. However, it cannot establish a comprehensive system for regional competitiveness to discuss and study the mechanism of FDI variations. Recently,although some papers have made interdisciplinary research on FDI variables (Table 1), there are still some de ciencies.
(1) Regression analyses are not the ideal choice for FDI variations.
Some studies with linear regression analyses try to evaluate the regional competitiveness for FDI, but ignore multi-collinearity of variables (collinear data) would lead to contradictory conclusions. Other studies choose Ridge regression or Partial Least Square (PLS) to research on FDI. However, though the collinear data are removed, yet the explanation for dependent variable would be much poor.
(2) Mechanism of FDI variations is a dynamic progress.
It's improper to merely focus on the actual utilization of FDI, inward FDI stocks or annual FDI, because the mechanism FDI variations including the entry and exit of FDI. For example, do governments attract new FDI would cause FDI losing (for potential resource shortage or competition)? There is a lack of literature focusing on losing and retaining FDI.
It's improper for a FDI study in single year or a short time series, because FDI is in uenced by the international market and changes with time. Besides, there is a Hysteresis Effect (time log) in FDI, so time series should be a long period to reduce error probability.
Overall, there is lacking in a holistic understanding of the nexus between above theories' research on regional competitiveness motivating FDI variations. And a disconnection and fuzz areas exist in above theories. This paper attempts to enrich interdisciplinary research cases and improve the existing theories which lack in a comprehensive understanding of FDI variations. We undertake a con gurational analysis for multidimensional and systematic evaluation and analysis, based on Sociology, Management and Economic Geography.
The reason why Chinese context is what we focus on, as following: (4) There is a universal reference value for other countries, if we explore Chinese mechanism of FDI variations.
So, we made a con gurational analysis of regional competitiveness, which impact on the high-volume entry and exit of TCs' FDI in different Chinese Provinces from 2002 (excluding the year China joined the WTO) to 2016 (for data availability).

A Con gurational View Of Evaluating Model
Strategic analysis typically concentrated on the industry-view and the resource-based view ( Table 2). These views evaluate the organization without considering relationship between the organizations strategic choices and institutional frameworks.

Restraining forces
Porter's (1990) Diamond Model is a tool for analyzing the organization's task environment.  emphasized that strategic choices should not only be a function of industry structure or companies' resources, but a function of the constraints of the institutional framework.
Following traditional Organization Economics and Industrial Management, Porter's diamond model takes the ve dimensions together: 1. Factor conditions (endowments); 2. Strategy, structure and rivalry; 3. Demand conditions; 4. Related and supporting industries; 5. Chances (challenge or fortune). The model has been adopted in Business, Management and Economics studies widely.

Regional Applicability Nature
Studies had showed that diamond model could also evaluate competitiveness in subnational levels (

Causal asymmetry
Causal asymmetry shows that the same result could come from different con gurations, and individual elements could play different part in con gurations (Ragin, 2009). That means high-level regional competitiveness does not need all conditions in high level, different con gurational conditions could serve as structural alternatives to lead a certain result. This also suggests the possibility and rationality that individual elements in con guration not always show up in regional competitiveness pro les.
We attempt to develop a referential and universal theory in an interdisciplinary approach for the entry and exit activities of TCs. And we found Porter's diamond model generalized from the Japanese, European and American experiences ), all of them are developed countries. Therefore, the model needs to be revised to be adapted in underdeveloped countries. By applying the revised diamond model to subnational level in China, we empirically identify the regional competitiveness con gurations which are related to the high-volume entry and exit of TCs. We gured out the dominating factors of regional competitiveness con guration as descripted below ( Fig. 1).

Market Conditions
Factor endowments Factor endowments demonstrate the quality of human, nancial and physical resources in a certain place (Tobin and Youngmi, 2018). The subnational factors include nancial market, capital ow, monetary policy and other nancial factors, as well as education level, infrastructure construction, labor force, legal conditions, industrial technology and other social comprehensive factors (Choi and Jang, 2016). For example the regional economic growth of a country or region mainly depends on the input of production factors and the drive of technological factors (Wang, Fan and Hu, 2019). There are signi cant regional differences in factor endowments, and TCs' resource bundle is a combination of advanced factor endowments and TC's resources. This can bring signi cant technology spillover and economic growth to the area. And advanced factor endowment is also the location advantage that FDI seeks (Eoin, 2018). TC's strategy tends to focus on regions with high output, high added value; in other words, with welldeveloped factor endowments.

Supporting industries and intermediary
Supporting industries and intermediary is a contributing factor to regional competitiveness in diamond model (Cui et  Free competition of product Free competition of product is associated with free and fair market environment which provides TCs with possibilities to expand its competitiveness and productivity advantage (Tobin and Youngmi, 2018). In the market economy, those regional leading enterprises are often the ones with a large amount of social The research showed that state-owned enterprises (SOEs) play a similar part in the market as monopolies. While the former has a stronger political purpose, the latter has a stronger pro t-making purpose (Bryan, 2009; Weiler and Hinz, 2018). SOEs can provide large-scale resources to market in the early stage of industrialization (Dent, 2003). Due to the state's direct control, SOE can reduce operating expenses, and achieve high productive e ciency and standard. SOEs could also provide supplementary resources and improve the diversity of market. Through state-led investment and acquisition, SOEs can maintain economic and social stability (e.g. providing employment, stabilizing market prices, and optimizing technical threshold) (Tigno and Jorge, 2014). However, SOEs may repress market-based competition, obstruct capital free circulation and weaken market signals. Because of the monopoly position of SOEs, they are facing the problems of ine ciency and unscienti c managing (Chiu and Lewis, 2015). Although SOEs can coordinate the market as participants, yet their existence will affect free trade and reduce the investment willingness of TCs.

Policy conditions
Policy conditions is a market coordination mechanism that government play role as a market system regulator. This is not administrative intervention, but the policies and regulations favorable to the market. For example, local government issues relevant policies including reducing enterprise taxes, shortening the administrative approval process, to attract TCs and stimulate investment (Pappalardo, 2014). Meanwhile, those policies to promote legal system, such as protecting intellectual property rights, maintaining legitimate competition and standardizing the market system, can accelerate TCs' integration into the local market and reduce operating costs (Lechner and Wunsch, 2009; Bengtsson, Porte and Jacobsson, 2017). The research showed that the Chinese regional government also plays a signi cant role in promoting restructure of industry and expanding market scale (Han and Kung, 2015). However, government also acting as a catalyst and challenger, the excessive intervention and uctuation of tax may also bring di culties to TCs ( Eklinder-Frick and Åge, 2016).

Methodology
Objective: The purpose of this research is to reveal regional competitiveness con gurations motivating FDI variation mechanism (the entry and exit of FDI) in multiple causal pathways. We adopted an abductive study design in which we revised and optimized diamond model, based on empirical research. And in this way, model is more proper and appropriate subnational areas. On the analysis, we made interdisciplinary research and applied "the fuzzy-set qualitative comparative analysis" (fsQCA) in exploring conjunctural causation (factor con gurations). Calibration: Calibration process is a transformation of the raw data into fuzzy-sets. A fuzzy-set is "a ne-grained, continuous measure that has been carefully calibrated using substantive and theoretical knowledge relevant to set membership" (Ragin, 2009, p. 45). In fuzzy-set logic, due to the practice of calibration, this measurement could be adopted in studies of identifying relevant and irrelevant variation.
With a "qualitative assessment of the degree to which cases with given scores on an interval scale are members of the target set" (Ragin, 2009, p. 96), this paper used three-value fuzzy-sets rule with calibration process to the all con gurational factors (inputs) and outputs (Ragin, 2009;Cui et al., 2019). Concretely, we made data as fully out (values below the lower quartile) and fully in (values above the upper quartile). This paper set the crossover point as median of the sample factors or outcomes (Fiss, 2011;Cui et al., 2019). Calibration setting in this paper is following (Table 3). Before obtaining con gurational solutions, this paper took an inspection of necessary conditions. Previous research suggested taking consistency in 0.90 as cut-off for necessary conditions. Namely, when consistency is greater than 0.90, it can be considered as a necessary condition for the solution (Ragin, 2008;Schneider and Wagemann, 2012). Table 4 demonstrated that none of the conditions exceeded the cut-off (calculated in fsQCA 3.0).  The consistency of single solution (con guration) and overall solution (con guration) is higher than the acceptable consistency-standard of 0.75. Therefore, nine con gurations above can be regarded as a combination of su cient conditions for the entry or exit of FDI. Overall solution coverage is 0.72 and 0.68 respectively. In empirical analyses, it shows variables (con gurations) are well-tting with the research object (entry or exit of FDI).
On the FDI entry, as shown on the Table 5 left side, Solution 1a and 1b reported that regions have factor endowments, potential market, non-state economy and policy conditions, when complemented by either absence of free competition of product or absence of supporting industries and intermediary, can attract FDI (above designated size). Solutions 2 showed that the presence of factor endowments, potential market, free competition of product and non-state economy are core conditions; the presence of supporting industries and intermediary is peripheral conditions, for a region in attracting TCs' investment.
Solution 3 demonstrated that the non-absence of potential market, free competition of product, policy conditions are core conditions; non-absence of supporting industries and intermediary as peripheral conditions to FDI entry. Solution 4 represents another regional competitiveness con guration associated with FDI entry, which combines potential market and non-state economy, as well as policy conditions, as core conditions, with the presence of supporting industries and intermediary as peripheral conditions.
On the FDI exit, as shown on the Table 5 right part, Solutions 5a and 5b revealed that regions with favorable potential market and policy conditions as core conditions, these places can also be in FDI exiting. Solution 6 showed that with the absence of factor endowments as core conditions, as well as the presence of supporting industries and intermediary and free competition of product as peripheral conditions, TCs exiting would be likely to happen. Solutions 7 showed that the presence of potential market as the only core condition; though there are two peripheral conditions: the presence of non-state economy, supporting industries and intermediary, regions would still be likely to involve in TCs existing.

Check of robustness
Robustness checks could show the stability of the con gurational solutions (Ragin, 2008; Crilly, 2011). We took two robustness checks separately. In rst check, for this paper adopting the frequency threshold at 1, we increased the frequency threshold to 2. In second check, for this paper adopting consistency cutoff in 0.80, we reduced consistency cut-off to 0.75, the minimum cut-off (Ragin, 2008).
The consistency of new solutions are lower than original ones, and the complexity and quantity of new solutions are far greater than that of the original ones. This is against the purpose of fsQCA: simplicity and representativeness. So solutions in this paper remained consistent and passed two robustness tests above.

Discussion
According to the different features of the research results, we divided them into three major categories (attracting FDI, foreign divestment and restructuring of FDI) and six minor types (from proposition 1 to 6).

Attracting FDI
The interaction mechanism of market and government on FDI is multi-threaded and complex. Myrdal (1957) suggested that government can play a positive role in economy with appropriate policy stimulus.  showed the government played as catalytic and Challenger when coordinating economy.
Our nding indicated that, under the relatively exible market conditions, there are two kinds of governments that can attract foreign investment The first type: 1a, 1b, and 4. Both non-state economy and policy conditions are present at provinces which are entering FDI and attracting TCs. In such configurations, four market conditions need not present at the same time. Instead, only need the non-absence of potential market, together with factor endowment or supporting industries and intermediary. It revealed that in case that the market conditions are not well-developed on all four conditions, but the government conditions are favorable enough (with non-state economy and policy conditions), foreign and FDI investors will be attracted and enter. Based on solution 1a, 1b, and 4, we proposed: Proposition 1: Regions have favorable local policies, no large-scale state-owned economies as well as great market potential, the regions will be favored by Transnational Corporations and attract large-scale foreign investment.
The Second type: Solution 2 and 3. They are different from the former type in that they only need one government condition to be able to harvest large amounts of foreign investment. But their market conditions are well-developed. The role of government conditions is not prominent in this type. Obviously, favorable market conditions make up for the lack of government condition. However, government conditions cannot be completely absent; even if Solution 2 has the most developed market conditions (have all of them). This result also proved that some elements of diamond model can be used as structural substitutes for each other . Based on solution 2 and 3, we proposed: region are not enough to support the future development of TCs, they will also consider divestment (Hoepner and Schopohl, 2018).
The third type: 5a, 5b, and 7. Their market conditions and government conditions are not fully developed (not good enough). Although their market conditions are not worse than 1a, 1b and 4, and in third type, they all have an economic basis (potential market). However, there is a lack of government condition. In the diamond model, any condition is a strategic factor of special signi cance ), which could trigger FDI exit. Based on solution 5a, 5b, and 7, we proposed: Proposition 3:When there are poor market conditions (lacking two at least) and government conditions (lacking one at least); it will lead the loss of foreign investment in regions.
The fourth type: Solution 6. Although Solution 6 has all the government factors, which shows that politics is actively guiding and assisting FDI into the regions; yet the market conditions in the region are very poor, which cannot support the strategic development needs of transnational corporations (Beck and Levine, 2002), nor provide corresponding resources and consuming markets. Therefore, due to the interest orientation of capital (investment) (Guiso, Sapienza and Zingales, 2000), foreign investors ow out in large quantities. This solution showed that in areas with weak market conditions, it is not suitable place for foreign investment, even if the government conditions are excellent. Based on solution 6, we proposed: Proposition 4:Regions with poor market basis will lead to the loss of FDI, and government conditions are not enough to prevent this trend.

Restructuring of FDI
This paper showed some configurations (4, 1a, 1b) which are associated with a great number of FDI entry are also associated with FDI exit (5b, 5a). The FDI restructuring means that previous foreign investors in the regions are weeded out and new foreign investors enter the market. Capital ow is a common phenomenon in market economy, because the market environment would change with time (Bams, Pisa and Wolff, 2019), and the dominant transnational corporations in the past may gradually exit with time. And with the development of the regional economy, it is common that the trend of laborintensive industry transforming technology intensive industry (André, Cardenete and Velázquez, 2005), so the restructuring of foreign investment in industry is widespread. Or the adaptability of foreign investors is not enough to meet the industrial upgrading and policy changing, resulting in being eliminated from the areas.
The fth type: 1a, 1b and 4; 5b. In this type, FDI entry and exit simultaneous, there are favorable government conditions but mediocre market conditions. It shows that government conditions just play a coordinating role in FDI mechanism. Because of the market competition, regions cannot always maintain the situation of attracting foreign investment. It also shows that market factors play a decisive role in FDI.
Under the existing market mechanism, enterprises cannot maintain the favorable competitiveness all the time. Enterprises with strong adaptability to market and government conditions may maintain a good development trend. Based on 1a, 1b and 4; 5b, we proposed: Proposition 5: Regions with favorable government conditions (all of them) but mediocre market conditions (no more than three conditions), there would be high rate of restructuring of FDI.
The sixth type: 3; 5a and 7. In the case of underdeveloped market factors, when applying policies to guide foreign investment in, due to the change of policy condition, a number of former foreign-funded enterprises would exit; because such change will weaken the previous TCs' dominant position, but the new foreign investors have the opportunity to get greater business space for development. Therefore, FDI will show such restructuring pattern. Based on 3; 5a and 7, we proposed: Proposition 6: Regions with poor market basis, but good policy condition, there could be high rate of FDI restructuring.

Contributions and implications
Theoretically Firstly, this paper took a multi-eld theoretical cooperation. We undertake a configurational analysis for multidimensional and systematic evaluation and analysis, based on Sociology, Management and Economic Geography. These typical theories have different concerns. For example, economic geography tends to research on regional or national level, adopted digital data and mathematical models to study regional competitiveness (Jansen and Stokman, 2014;Stallkamp et al., 2018). Meanwhile, management and sociology attempt to analyze regional competitiveness from the perspective of enterprise or society with macro-description and empirical research (Inekwe, 2013; Tomohara and Yokota, 2011). We connect these parallel theories to study on concrete case (China).
Secondly, from the macro-scopic and meso-scopic view, we provided a new reference of con guration for diamond model ( gure 1). Additionally, we empirically revised and applied model to sub-national regions; that enriches the application scope of diamond model. From the view of con guration, this paper discussed the configurational nature and regional applicability nature which have not been sufficiently examined in previous research (Tobin and Youngmi, 2018).
Thirdly, this paper enriched the research on the mechanism of FDI variation, which includes entry and exit.
However, typical studies on FDI merely concentrated on actual utilization of FDI, inward FDI stocks or annual FDI. In the help of fsQCA, we took a con gurational analysis for regional competitiveness, which impact on the high-volume entry and exit of TCs' investment separately.

Practically
This paper provides the enlightenment of policy and management for the provincial government. For example, we found that in areas with weak economic foundation; even if the policy conditions are favorable and there is no intense competition from state-owned enterprises (e.g. Solution 5b), due to the lack of market factors and no consuming market, FDI will exit on a large scale. With this nding, local governments could focus on supporting native enterprises rather than wasting resources to attract foreign investment. When the local market had developed and improved, then attracting foreign investment; in this way, government could optimize e ciency of resource utilization.

Limitations
1. The research data comes from a certain country (China) which may have regional limitations. Other underdeveloped countries and emerging economies may have unique regional conditions and market backgrounds; the conclusion of FDI variation mechanism may be different, however, we believe that the research method still could be lessons and reference.
2. There is no consideration of special events, such as the world nancial crisis in 2008, the U.S. subprime crisis in 2009 and other events that lead to changes of global nancial system, which may affect the mechanism of FDI. In order to avoid such problems, future research can try to lengthen the research period (e.g. from 1990 to 2020), or make time phased research (e.g. 2000 to 2010; 2011 to 2020). NOTES 1. A high value reveals that this province has a highly developed factor condition in this year.

Declarations
No con ict of interest exits in the submission of this manuscript. It is an original research that has not been published previously, and not under consideration for publication elsewhere.