Foreign direct investment as a strategic linkage

Abstract

Abstract This article studies the pattern of Taiwanese foreign direct investment (FDI) in light of strategic linkage theory. Measuring the level of proprietary asset by technological capability and scale of operation, we found that firms possessing higher levels of proprietary assets invest in more advanced host countries. Through FDI, higher levels of proprietary assets are linked to higher levels of strategic assets, which in turn enhance the technological and marketing capabilities of investing firms. Firms better endowed with proprietary assets are also shown to be more inclined to make multiple investments and more capable of investing in countries which are psychologically and geographically distant from Taiwan. In contrast, firms with low levels of proprietary assets seek linkages to nonstrategic assets in a single country which is psychologically and geographically close to Taiwan. © 1998 John Wiley & Sons, Inc.