Productivity and FDI of Taiwan Firms: A review from a nonparametric approach

Author Name WAKASUGI Ryuhei  (Faculty Fellow, RIETI) /NATSUHARA Takashi  (Kyoto University)
Creation Date/NO. May 2012 12-E-033
Research Project Study of the Creation of the Japanese Economy and Trade and Direct Investment
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This paper examines whether firms' productivity and the attributes of foreign direct investment (FDI) destinations affect both the choice of these destination as well as the accumulated number. The results of our examination, using firm-level data of Taiwan, present new evidence: (i) the productivity of firms conducting FDI in high-wage countries is higher than that in low-wage countries, but is not higher than the productivity of non-FDI firms; and (ii) the higher the productivity, the larger the number of FDI destinations regardless of the market attributes. These results provide the policy implication that government support for raising the productivity and lowering the cost of internationalization will accelerate the internationalization of Taiwan firms and eventually enhance economic growth in Taiwan.