The right tree for the right bird: Location choice decision of Taiwanese firms’ FDI in China and Vietnam

Abstract

Firms have to invest in foreign markets to maintain their competitive advantage, but a popular location for foreign direct investment (FDI) may not be suitable for everyone. Available literature as to location choice is mainly based on developed countries and large multinational enterprises (MNEs). However, this study investigates the location choice behaviour of firms originating in newly industrialized economies (Taiwanese firms) investing in emerging countries (China and Vietnam). According to the national economic development of China (further divided into South China and East China) and Vietnam, we divide the location into more developed and less developed regions. Through an empirical firm-level data collection and conditional logit analysis, this study found that: (1) firms with stronger ownership advantages prefer to invest in more developed than less developed regions; (2) firms occupying favourable positions in their network prefer to invest in more developed than less developed regions; (3) firms with a high degree of networking prefer to invest in less developed than more developed regions; (4) firms choose to invest in more developed than less developed regions to gain access to a large market; and (5) firms with strong resource-seeking motives prefer to invest in more developed than less developed regions to access their resources.