Outward Investment To China And Local Innovation Of Taiwanese Manufacturing Firms

Chih Hai Yang; Yi Yin Wu; Hui Lin Lin

doi:10.1111/j.1468-5876.2009.00498.x

Outward Investment To China And Local Innovation Of Taiwanese Manufacturing Firms

Chih Hai Yang, Yi Yin Wu, Hui Lin Lin

Department of Economics

Research output: Contribution to journal › Article › peer-review

20 Scopus citations

Abstract

Does outward investment induce more domestic innovation or simply move local innovative efforts to foreign plants? This question is topical and relevant to Taiwan in view of its large share of outward investment concentrated in China and the special political relationship between the two sides of the Taiwan Strait. The purpose of this paper is to examine the effect of outward investment in China on domestic innovative activity in Taiwan. Overall, this study finds that a positive relationship exists between outward investment and innovation in terms of R&D intensity and patents, implying that investing in China is part of a global resource allocation strategy of Taiwanese multinational enterprises to allocate production in China and pay more attention to innovative activity in their domestic plants. Moreover, the deregulation of the policy regarding investing in China in 2001 has induced an upsurge in investment in China, although it does not seem to have brought about an outflow of technologies.

Original language	English
Pages (from-to)	538-557
Number of pages	20
Journal	Japanese Economic Review
Volume	61
Issue number	4
DOIs	https://doi.org/10.1111/j.1468-5876.2009.00498.x
State	Published - Dec 2010

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title = "Outward Investment To China And Local Innovation Of Taiwanese Manufacturing Firms",

abstract = "Does outward investment induce more domestic innovation or simply move local innovative efforts to foreign plants? This question is topical and relevant to Taiwan in view of its large share of outward investment concentrated in China and the special political relationship between the two sides of the Taiwan Strait. The purpose of this paper is to examine the effect of outward investment in China on domestic innovative activity in Taiwan. Overall, this study finds that a positive relationship exists between outward investment and innovation in terms of R&D intensity and patents, implying that investing in China is part of a global resource allocation strategy of Taiwanese multinational enterprises to allocate production in China and pay more attention to innovative activity in their domestic plants. Moreover, the deregulation of the policy regarding investing in China in 2001 has induced an upsurge in investment in China, although it does not seem to have brought about an outflow of technologies.",

author = "Yang, {Chih Hai} and Wu, {Yi Yin} and Lin, {Hui Lin}",

note = "Funding Information: The authors would like to thank Jin-Tan Liu, Jin-Long Liu, Meng-Wen Tsou, two anonymous referees, and the co-editor Kazuo Ogawa for their helpful comments and suggestions on an earlier version of this paper. Chih-Hai Yang acknowledges the financial support of the Council for Economic Planning and Development, Executive Yuan (96-036-206). Chih-Hai Yang and Hui-Lin Lin also acknowledge the financial support of the Center for China Studies of National Taiwan University. Any opinions expressed are those of the authors and not those of the Council for Economic Planning and Development. The usual disclaimer applies.",

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N2 - Does outward investment induce more domestic innovation or simply move local innovative efforts to foreign plants? This question is topical and relevant to Taiwan in view of its large share of outward investment concentrated in China and the special political relationship between the two sides of the Taiwan Strait. The purpose of this paper is to examine the effect of outward investment in China on domestic innovative activity in Taiwan. Overall, this study finds that a positive relationship exists between outward investment and innovation in terms of R&D intensity and patents, implying that investing in China is part of a global resource allocation strategy of Taiwanese multinational enterprises to allocate production in China and pay more attention to innovative activity in their domestic plants. Moreover, the deregulation of the policy regarding investing in China in 2001 has induced an upsurge in investment in China, although it does not seem to have brought about an outflow of technologies.

AB - Does outward investment induce more domestic innovation or simply move local innovative efforts to foreign plants? This question is topical and relevant to Taiwan in view of its large share of outward investment concentrated in China and the special political relationship between the two sides of the Taiwan Strait. The purpose of this paper is to examine the effect of outward investment in China on domestic innovative activity in Taiwan. Overall, this study finds that a positive relationship exists between outward investment and innovation in terms of R&D intensity and patents, implying that investing in China is part of a global resource allocation strategy of Taiwanese multinational enterprises to allocate production in China and pay more attention to innovative activity in their domestic plants. Moreover, the deregulation of the policy regarding investing in China in 2001 has induced an upsurge in investment in China, although it does not seem to have brought about an outflow of technologies.

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Outward Investment To China And Local Innovation Of Taiwanese Manufacturing Firms

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