Abstract
This study aims to discuss the effect of foreign direct investment on firm productivity. Based on past studies, when firms received foreign direct investment, it accompanied new technology and knowledge, so raised firm's productivity.Using data on the public listed manufacturing companies in Taiwan, analysis by ordinary least squares regression model, we attempts to verify the positive effect of foreign direct investment on productivity. Based on our empirical result, we verify that foreign direct investment do have significantly positive effect on firm productivity. The results also show that foreign firms perform better than domestic firms, and no difference between firms which foreign ownership is majority or minority. Furthermore, we connected foreign direct investment to research & development investment, and find out firms have higher positive effect of R&D when they received foreign direct investment. Finally, we consider the interaction terms between firm characteristics and foreign direct investment, concluded that only large firms show significantly positive effect of foreign direct investment, and younger firms have higher effect.