A Study of the Profitability of Taiwanese Electronics Corporate Groups in Mainland China
Date Issued
2012
Date
2012
Author(s)
Yao, Yen-Tsung
Abstract
The purpose of this research examines the performance of Taiwanese electronics corporate groups and non-corporate groups in China and also analyzes the “aggregation effect” of Taiwanese entrepreneurs. The author hopes that this article will enable the readers to have a better understanding of the investment position for Taiwanese electronics industry in China; and also provide valuable academic insights for Taiwanese entrepreneurs who are considering advancing to China in the future.
Through spatial analysis and linear regression, an inspection towards variables; such as Taiwanese entrepreneurs’ profitability, aggregation effect, internal factors of a company, China’s social and economic backgrounds; is conducted. From the evidence, one can see that corporate groups have a significantly higher profitability than that of non-corporate groups; as for the aggregation effect, since government policies greatly impact China’s “industry aggregation”, the areas where more preferential policies are released tend to attract more foreign investments, which forms the aggregation effect. As the effect becomes stronger, investors will receive more economic benefits in that area. In addition, this article reveals that as Taiwanese corporations grow, so does the remuneration; this indicates that many Taiwanese businesses probably cooperate through supply chain managements or strategic alliances in order to have a positive impact on the ability to produce profit.
Moreover, internal factors such as staff productivity, debt ratio; even labor costs, infrastructure, government policies and export ratio of firms in China; play an important role in influencing Taiwanese entrepreneurs’ profitability. Note that through spatial analysis, it is evident that China’s policy to distribute corporate groups nationally makes better profit than keeping it to a single location; however, this variable is less apparent in the model as it is affected by other factors.
All in all, China’s economic preferential policies is essential in attracting FDI. This includes the regulation of wages, the release of preferential policies on exports, the establishment of a comfortable investment environment and more. Not only do these affect the aggregation level of foreign investors, it is also one of the main reasons why Taiwan electronics corporations can reduce operating costs in China.
Key Words: profitability, corporate group, aggregation effect, spatial analysis
Subjects
profitability
corporate group
aggregation effect
spatial analysis
Type
thesis
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