The Association between the Operating Efficiency of Taiwanese FDI Enterprises in Mainland China and the Investment Performance of Their Parent Companies

Abstract

This paper uses data envelopment analysis and seemingly unrelated regression estimation model to examine the association between the operating efficiency of Taiwanese FDI enterprises in mainland China and the investment performance of their parent companies. We find that the more capital-intensive Taiwanese FDI enterprises in mainland China have higher operating efficiencies. Enterprises investing in East China area have lower operating efficiency. In addition, higher operating efficiencies of FDI enterprises in mainland China are associated with higher investment performance of the Taiwanese parent companies. The Taiwanese parent companies with greater investment of FDI enterprises in mainland China also have higher investment performance. The Taiwanese parent companies with higher R & D expenditure percentages do not result in improved investment performance because of a lack of spillover to FDI subsidiaries or more uncertain factors. Furthermore, the wholly-owned investment type of a parent company has greater investment performance than joint-venture investment type.