This paper documents the relationship between R&D, firm size, and growth rate for a panel data of Taiwanese electronics firms. Using GMM method to control for endogeneity of R&D, the main finding is that an increase in R&D induces a higher growth rate and this impact is particularly higher for small firms. Testing Gibrat’s law shows that small firms indeed have a higher growth rate than their larger counterparts, while size is independent with firm growth in the group of large-sized firms, supporting the weak form of Gibrat’s law. Copyright Springer 2005growth, R&D, size, J23, L11, L60,

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This article investigates the effect of foreign direct investment (FDI) on the productivity of parent firms for multinational enterprises in Taiwan. The current research specifically examines the potential differences in productivity effect between FDI toward developing (vertical FDI) and developed countries (horizontal FDI) and between electronics and non-electronics firms. Using panel data on Taiwan firms from 2000 to 2005, results obtained using propensity score matching (PSM) show that multinational firms experience a higher productivity following their FDI in developing countries. A time lag exists in productivity gain of investment to developed countries, and is relevant only to electronics firms. Employing the generalized method of moment of the panel fixed model to control for problems of endogeneity and unobservable heterogeneity, the empirical finding suggests that productivity effect caused by investing in developing countries remains significantly positive. A lagged productivity-enhancing effect is also found after FDI in developed countries for both electronics and non electronics firms.

We studied the effect of tax policy on the productivity of Taiwanese manufacturing firms from 2001 to 2008. First, we investigated the determinants of firm decisions on tax credit applications. By employing the dynamic random effect probit model, this study demonstrated that past tax credit use has exerted a causal effect on current tax credit use across various industries. Specifically, there has been a persistence use of tax credit among manufacturing firms in Taiwan. Second, we employed the panel instrumental variable approach to control for tax credit endogeneity and firm heterogeneity in determining firm productivity. The results indicated that firms' tax credit use produced a positive and statistically significant effect on productivity. Finally, after categorising the firms as either electronics or non-electronics businesses, we observed that the marginal effect of tax credits has been associated with the productivity of electronics firms. This study demonstrated that tax credit use among Taiwanese firms has enhanced their productivity. This indicates that effective tax policy can promote national economic growth.