Competition cl Change, 2000 Vol.4, pp. 325-352 Reprintsavailable directlyfromthe publisher Photocopyingpermitted by licenseonly Q 2000OPA (OverseasPublishersAssociation)N.V. Published by licenseunder the HarwoodAcademic Publishersimprint, pan oCTheGordonand Breach PublishingGroup. Printed in Singapore. Foreign Investment and Development: The Positive Effects of Embedded Foreign Investment in China Brad Christerson This paper integrates the concept of "embeddedness" from economic sociology into the global political economy perspective in order to understand the effects of foreign investment on development. 604 foreign invested enterprises in China are used to test whether or not foreign investment that is embedded in ethnic ties leads to more positive development outcomes than those produced by investment not embedded in these institutions. The analysis concludes that foreign investment that is embedded in ethnic ties leads to greater linkages to local firms and more high-value activities being transferred to the investee nation. The article concludes by arguing for a greater integration of the economic sociology and global political economy literatures. Introduction This piece of research integrates two different theoretical perspect- ives in the sociology of economic behavior in order to understand the effects of foreign investment on economic development: the global political economy literature and the economic sociology literature. Both literatures are interested in the social aspects and consequences of economic activity, yet view these activities through different sets of concepts. The global political economy literature is organized loosely around the concept of "development", or how economies change, and the resulting impact on societies when those economic changes occur. In particular, the spread of global capitalism is ana- lyzed and critiqued. The economic sociology literature is organized around a different set of concerns, namely how social institutions shape economic behavior. The concept of "embeddedness" is key to this literature - economic behavior is embedded in pre-existing social structures and institutions. In an attempt to better understand the effects of foreign invest- ment on local economies, this paper will use the concept of embedded- ness as an independent variable which can partially explain, I argue, 325