Outward FDI to China and the parent firm's ability to create value added per worker

Shu Chin Huang, Chang-Ching Lin

Research output: Chapter in Book/Report/Conference proceedingChapter

Abstract

The force of globalization has forced Taiwanese Information and Electronics suppliers to invest in mainland China. Traditionally, increases in a company's value added per worker were commonly associated with changes in physical capital, human capital and production technologies. However, changes in value added can also be the result of outward FDI because of capital leakage, export substitution, import penetration, technology transfer, and higher earnings from the subsidiary than the parent company, which further encourages firms to lower domestic production. This paper estimates the impact of outward FDI in mainland China on parent firms' abilities to create domestic value added per worker in the Information and Electronics sector in Taiwan using samples from 1991 to 2006. The results show that outward FDI in China lowers parent firms' value added per worker in Taiwan during this period. It implies that the government should develop strategies to increase domestic productivity while opening cross-strait investment.

Original languageEnglish
Title of host publicationForeign Direct Investment (FDI)
Subtitle of host publicationPolicies, Economic Impacts and Global Perspectives
PublisherNova Science Publishers, Inc.
Pages103-125
Number of pages23
ISBN (Print)9781628084030
Publication statusPublished - 2013 Dec 1

All Science Journal Classification (ASJC) codes

  • Economics, Econometrics and Finance(all)
  • Social Sciences(all)

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