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To Invest or Not to Invest in China

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  • Huilin Lin
  • Ryh-Song Yeh

Abstract

This research used two samples of enterprises, 123 that invested in China and 213 that did not, to examine why many Taiwanese enterprises stay home despite others that have invested in China. Our results found that most Taiwanese enterprises are pushed to invest abroad by increasing wages at home and increasing competition in the export market, which lowers their profitability. The key factors determining to invest or not to invest in China are whether they are satisfied with their profits, and whether they are able to upgrade organizational capability, if they are not satisfied with the profits. However, this conclusion does not totally apply to large enterprises. For large enterprises, their investment in China has little to do with profitability and R&D intensity, but more to do with export competition and technological capability. Furthermore, investment in Southeast Asia is complementary to investment in China for large enterprises, but a trade-off for small and medium ones.

Suggested Citation

  • Huilin Lin & Ryh-Song Yeh, 2004. "To Invest or Not to Invest in China," Small Business Economics, Springer, vol. 22(1), pages 19-31, February.
    • Handle: RePEc:kap:sbusec:v:22:y:2004:i:1:p:19-31
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    Cited by:

    1. Yanhua Chen & Suqiong Wei & Hongou Zhang & Yuehua Gao, 2019. "Spatiotemporal Evolution of the Taiwanese-Funded Information Technology and Electronics Industry Value Chain in Mainland China," Sustainability, MDPI, vol. 11(11), pages 1-18, June.
    2. Saleh, Ali Salman & Anh Nguyen, Thi Lan & Vinen, Denis & Safari, Arsalan, 2017. "A new theoretical framework to assess Multinational Corporations’ motivation for Foreign Direct Investment: A case study on Vietnamese service industries," Research in International Business and Finance, Elsevier, vol. 42(C), pages 630-644.

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