Impact of localisation and R&D intensity on the firm performance of MNE subsidiaries investing in emerging markets: an empirical analysis of Taiwanese investment in China
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Date
2009Author
Li, Chun-Sheng (Joseph)
Metadata
Abstract
In this thesis, using Taiwanese companies investing in China as the sample, the
impact of localisation and R&D intensity on the firm performance of MNE
subsidiaries investing in an emerging market are examined. There has been limited
previous research for this important topic. In order to strengthen the statistical results,
the thesis includes two major models to compare: OLS regression model and
binomial logit model.
In the empirical part, five explanatory variables: local employment ratio (local
worker linkage), local content ratio (local supplier linkage), local capital ratio (local
financial linkage), local sales ratio (local sales linkage), and firm’s age will be
employed to measure the scope and extent of localisation. The strategic goal and
operation type of local-market-seeking FDI are significantly different from that of
export-oriented FDI. Thus, I categorise Taiwanese manufacturing industries
investing in China into two groups: the local-market-seeking group and the exportoriented
group.
It is noteworthy that for these two groups, each localisation variable and R&D
intensity exert a different impact on subsidiary performance. Besides, the aggregate
influence of these five localisation variables on the subsidiary-level performance of
local-market-seeking group is larger than that on the subsidiary-level performance of
export-oriented group. Therefore, it is suggested that local-market-seeking FDI is
more affected by host country local business environment than is export-oriented
FDI.