The determinants of foreign direct investment in China: The case of Taiwanese firms in the IT industry

This study illustrates the factors that affect a firmʹs intention to engage in foreign direct investment (FDI) in China, using Taiwanese firms in the Information Technology (IT) sector as an example. By building upon the literature, we investigate a firmʹs decision to engage in FDI by taking industry and firm factors into consideration. This study applies an event history technique to perform an empirical analysis, taking into account the conditional probability of the element of time. These factors are analyzed in a dynamic context using a sample of 667 Taiwanese firms in 10 industries between 1996 and 2005. We find that network linkages, the expansion of markets, and Chinaʹs incentive policies positively affect the intention to engage in FDI. A firm with a higher degree of export orientation and larger firm size also has a strong effect on motivating FDI.