Summary
This paper analyses the effects of investment characteristics and location choice on the optimum governance structure for foreign-based investment activities on the part of Taiwanese manufacturing firms in China. We use a structured questionnaire to collect the data from "Taiwan Investments in mainland China " published by China Credit Information Service, Ltd. 108 questionnaires were valid, the overall response rate in this study is 10.9%. The result shows that a centralized structure can economically restrain middle-level opportunism, that administrative control is a critical principle governing activities where there are high investment risks, and that socialization can mitigate potential conflicts among industry network partners.
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Extract
Determinants of the Optimum Governance Structure of Firms Investing in a Foreign Country: An Empirical Study
Introduction
The motivating forces for companies to invest abroad include the quest both to secure key supplies, and new market opportunities, and to gain access to relatively low-cost factors of production(Barlett, Ghoshal, and Birkinshaw, 2003). To satisfy such needs and to obtain competitive advantage, the effectiveness and efficiency of location choice and the governance mechanisms in force at those locations are critical issues. Among the major factors affecting location choice is location advantage, which is typically determined by location competence and location risks. Scholars have recently been emphasizing the importance of cluster effects derived from a network of industries and inter-personal relationships as these provide access to and deploy relational capital (Porter, 1998; Kale et al., 2000; Chen, Chen, and Ku, 2004)Location choice aside, institutional arrangements for foreign op...See the full content of this document
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