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Keywords:

  • Multinational enterprises (MNEs);
  • foreign direct investment (FDI);
  • location-specific factors;
  • firm performance;
  • case study research

ABSTRACT

In today's global business, location-specific factors represent the special advantages accruing to MNEs investing in a particular host country. First, this study aims to assess the importance of location-specific factors in China, and how these factors have changed over the years 2003, 2004, and 2005. Second, this case study intends to investigate the strategies utilised by the Taiwanese respondent MNE subsidiaries to exploit China's location-specific factors, and then explore the firm performance of the Taiwanese respondent subsidiaries in China. The findings of this study suggest that most Taiwanese respondent MNEs, based on a cost leadership strategy, are keen to exploit China's lower-cost labour resources. However, the reality that the average labour cost in China (especially in the coastal provinces), is rising is also reflected in this survey result. Moreover, the high level of local sales seems to show that Taiwanese companies are creating more marketing networks to expand local sales in China's domestic market (a growth strategy). Taiwanese respondent firms are satisfied with their subsidiary performance in China, and are positive about the recent developments of China's location factors.