Host-country experience, location strategy and investment performance: An empirical study of Taiwan IT companies in China

Abstract

Previous studies on investment location focused on local environmental factors, but tended to overlook the fact that firms' host-country experience might have an impact on their location strategies and influence the investment performance. This study categorized location strategy in the breadth and depth of foreign investment and hotspots for investment to compensate for the inadequacy of relevant studies. This study chose 120 listed Taiwanese electronics companies that had invested in China between 1999 and 2007, as the research data, to examine the impact of host-country experience on the three types of location strategies and the impact of a specific location strategy on investment performance. This study discovered that as firms increased their host-country experience, the breadth, and depth of their foreign investment increased, as well as their investment in hotspots. In addition, the wider the range a firm's foreign investments were, the better their investment performance would be. The impact of diversity on investment performance had a deferred effect. However, if firms invested in foreign hotspots, their potential profit might decrease, due to strong competition that detracted from investment performance.