Does Subnational Region Matter? Taiwanese Subsidiaries Performance in Mainland China

Abstract

In researching for corporate performance as described in the main source of theme literatures, current researches presume that countries have the same environment in different regions within a country regardless if it is the environment of one country or multiple countries in which does not consider the impact of regional influences on firm performance. This paper collects data from Taiwan’s conglomerates in mainland China as a sample, which decomposed subsidiary performance into industry effects, regional effects, parent company effect, subsidiaries effects and annual effects to analyze the source of performance variance. Studies have shown that regional factor is one of the important factors affecting the performance of subsidiaries and regional effects and industry effects jointly affect the performance of the subsidiary. In the comparative study of the different regions, we find that in the explanation of company performance variance, the internal effects (the parent company and the subsidiary effects) are more important in a higher level of institutional development of the region (Yangtze River Delta (YRD)); on the contrary, the external effects (regional and industry effects) are more important in a higher level of institutional development of the region (Pearl River Delta (PRD )).