FDI, exports and export spillover in Taiwan's electronics industry

This study primarily examines whether and how a firm's exports are influenced by its own and other firms' foreign direct investment (FDI) in an industry characterized by high proportions of exporters and FDI. A review of 619 firms in Taiwan's electronics industry from 2006 to 2011 indicates the presence of optimal FDI in terms of exports. In addition, results suggest a negative (positive) export spillover from FDI for firms with low (high) FDI, signifying that FDI's congestion/crowding-out effect is greater (less) than the demonstration/imitation effect for such firms. Moreover, a firm's exports generally decrease with other firms' exports particularly when its FDI is low, thus suggesting the predominance of competition's negative effect over its positive effect under such circumstances. Furthermore, export spillover from FDI occurs through the competition effect and technology information effect, where the former (latter) drives a negative (positive) export spillover.