Abstract: This study investigates whether external factors impact economic agglomeration and examines the country-specific agglomeration of FDI within the same city. This paper uses geographic coordinates data of newly registered foreign-funded enterprises in China from 1992 to 2018 to explore the impact of national factors on the spatial distribution of FDI within cities. Empirical analysis confirms the significant influence of the source country on the clustering of new foreign investments within cities, and the tendency of new foreign-funded enterprises to locate closer to existing investments from the same source country in intra-city. This conclusion still holds in a series of robustness tests. The study also finds a phenomenon of neighboring-country agglomeration of foreign-funded enterprises within cities. Heterogeneity analysis suggests that country-specific agglomeration is more pronounced in cities with a lower level of national development, smaller investment sizes, and investments in eastern China. Mechanism analysis finds that country-specific effects influence foreign investment locations by mitigating competitive disadvantages, fostering social networks, and creating legitimacy spillovers. Finally, this study also finds that regional policies and industrial factors do not affect the spatial distribution of FDI within cities, while the country-specific agglomeration may be related to industrial linkages.
