For a long time, local governments have implemented varies of competition strategies, including tax incentives, land granting, and infrastructure construction, in order to attract foreign direct investment（FDI）, which promoted the rapid growth of China’s economy. However, as China’s economic development enters the stage of “new normal”, these traditional competitive strategies have been exhausted and the related traditional competitive advantages no longer exist. In this new context, various innovative competitive strategies are continuously emerging. Among them, the holding of full marathons is particularly eye-catching. We argue that the successful holding of this event demonstrates the strong resource coordination and comprehensive management capabilities of the host government, thus sending a positive signal of an “effective government” to the investors, which is conducive to attracting FDI.
Based on the “government competition theory” and the “signaling theory”, this paper constructs a theoretical framework to analyze the internal mechanism of city marathons affecting FDI inflows. We argue that under the institutional arrangement of “China’s style decentralization”, the “effective government” with strong capability has the incentive to hold marathons in order to convey its positive image and gain an advantage in the competition for FDI. Based on the panel data of 286 prefecture-level and above cities in China from 2009 to 2018, this paper empirically tests the relevant research hypotheses. We find that cities hosting marathon events can attract more FDI inflows, and this “attracting capital effect” is more obvious in those host cities with larger market sizes and richer governments. After correcting various measurement errors of marathon events, the “attracting capital effect” remains robust. Meanwhile, we do not find that the initial level of FDI in cities has predictive power for holding marathon events, thereby negating the possibility of “reverse causality” to a certain extent. Therefore, the combination of market size, government financial resources, and “effective government” serves as an important foundation for promoting cities’ high-quality open development.
This paper has significant implications both in theory and policy. It deepens the academic’s understanding of local government competition strategies, and also inspires city governments to actively build “effective governments” on the basis of market development and financial guarantees, and send positive signals to the outside world by holding large-scale sport events, thus promoting FDI inflows and high-quality open development. At the same time, this paper also enriches the relevant literature on the FDI determinants in developing countries and the economic effects of sport events.