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An Analysis of Industrial Characteristics and Incentives on Foreign Investment: The Case of Rapid Economic Growth in Taiwan

  • Jo-Hui Chen

    (Department of Business Administration, Chung Yuan Christian University)

Registered author(s):

    This study measured the impacts of the industrial characteristics and the fiscal incentives that influenced foreign direct investment. We used the fixed effect model with a 2SLS simultaneous equation for the period of rapid economic growth from 1980 to 1996 across nine industries is Taiwan. We found that the wage and market size are positively correlated with foreign national investors, while exports are negatively correlated with overseas Chinese investors. The results also indicated that the tax holiday and the statute for the promotion of upgrading industries affect foreign national investors positively, but that R&D tax credits are ineffective. The relatively high effective tax rates may not deter investments by foreign national investors, thus providing more profitability to a region of economic growth, such as Taiwan. In addition, the profitability of overseas Chinese investors is supported by asset efficiency.

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    File URL: http://jefsite.org/RePEc/pep/journl/jef-2005-10-3-e-chen.pdf
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    Article provided by Pepperdine University, Graziadio School of Business and Management in its journal Journal of Entrepreneurial Finance and Business Ventures.

    Volume (Year): 10 (2005)
    Issue (Month): 3 (Fall)
    Pages: 89-107

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    Handle: RePEc:pep:journl:v:10:y:2005:i:3:p:89-107
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    1. Xiaming Liu & Haiyan Song & Yingqi Wei & Peter Romilly, 1997. "Country characteristics and foreign direct investment in China: A panel data analysis," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 133(2), pages 313-329, 06.
    2. Chen, Tain-Jy, 1992. "Determinants of Taiwan's direct foreign investment : The case of a newly industrializing country," Journal of Development Economics, Elsevier, vol. 39(2), pages 397-407, October.
    3. Zhang, Kevin Honglin, 1999. "Foreign Direct Investment and Economic Growth: Evidence from Ten East Asian Economies," Economia Internazionale / International Economics, Camera di Commercio di Genova, vol. 52(4), pages 517-535.
    4. Li, Jiatao & Guisinger, Stephen, 1991. "How well do foreign firms compete in the United States?," Business Horizons, Elsevier, vol. 34(6), pages 49-53.
    5. Robert J. Newman & Geoffrey K. Turnbull, 1991. "The Interindustry Distribution Of Effective Tax Rates For A State Corporate Income Tax," The Review of Regional Studies, Southern Regional Science Association, vol. 21(1), pages 65-78, Spring.
    6. William H Davidson, 1980. "The Location of Foreign Direct Investment Activity: Country Characteristics and Experience Effects," Journal of International Business Studies, Palgrave Macmillan, vol. 11(2), pages 9-22, June.
    7. repec:sae:niesru:v:160:y::i:1:p:87-99 is not listed on IDEAS
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