Abstract
In past two decades, the outflow of Taiwan’s firms towards China has dramatically increased. However, regarding the study of Taiwan’s FDI (Foreign Direct Investment) in China, the literature is limited on exploring the original causes that drive Taiwan’s firms across Taiwan Strait. This paper is the first work intends to explore the determinants that cause existed Taiwan’s capital reinvesting in China. Due to lack of official statistical data, the study use questionnaire to survey the first hand data by through some local Taiwanese Investment Associations in China. We collected data from 93 firms, among which, 78 are effective. By using these data, we first analyze the basic statistical characteristics of these firms. Then we use logistic regression to test the six hypotheses proposed by this study. We finds that (1) Taiwan’s reinvestments in China are close to “expansionary type of FDI”, rather than “defensive type of FDI” which has long been regarded as the main type of Taiwan’s FDI in the literature. (2) Most re-investing firms do not have scale advantage. That is, most Taiwan’s firms are small and median size. (3) “Lower wage” is no more a key factor to attract Taiwan’s capital re-investing in China. (4) The effective policies of local Chinese governments is also an important factor to attract the reinvestment of Taiwan’s FDI. According to the data analysis, the study also finds that (1) the scale of Taiwan’s firm in China is gradually growing, and (2) more and more Taiwan’s firms are targeting in China’s domestic market, instead of purely exporting OEM products from China to the western world. Therefore, it is a significant signal that a vertical enterprise-wide integration strategy across Taiwan Strait is helpful to the future economic development of Taiwan.