Internationalization of Taiwanese manufacturing firms: The evolution of subsidiary mandates and capabilities

Abstract

We explore the internationalization of Taiwanese manufacturing firms by studying the evolutionary trajectories of their subsidiaries. Building upon the literature, we formulate and apply dimensions capability development and mandate expansion to explain the evolutionary paths of Taiwanese foreign direct investment. Subsidiaries are categorizable into groups from low to high performance: Pure Implementer, Capability Contributor, Mandate Extender and Global Innovator. Using data from Taiwanese firms’ foreign expansion, we find that subsidiaries with longer host-country experience and founded by parent firms with higher geographic dispersion are more likely to expand their mandates and/or develop new capabilities, which in turn lead to better subsidiary performance.