—FDI enterprises from the same source country agglomerated in a region in China, i.e., a geographical agglomeration, was a main trend in recent years. An oligopoly output competition model was therefore developed between FDI enterprises and host country enterprises, with a conjectural variable introduced to weigh up the cooperation level between relevant enterprises, thus simulating and analyzing the location choice behavior of the agglomeration of home-country FDI. It was found that foreign enterprises will locate in the medium or small city which has a certain agglomeration effect when foreign investment enterprises can constitute the strategic alliance to cooperate their yield incompletely. The less degree enterprises cooperate their yield is, the bigger agglomeration effect that the location of foreign capital enterprises requests.
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