MULTINATIONAL ENTERPRISES

Multinational enterprises

Multinational enterprises

Introduction

In the 1980s there were both economic and non-economic factors impacting on Taiwan's economy and creating a worsening business environment (Chiang, 1994). The main economic factor was Taiwan's huge trade surplus which had caused the appreciation of the New Taiwan (NT) dollar, the introduction of hot money into the economy and an increase in the money supply. As a consequence, Taiwan's industries had their competitiveness eroded due to the increases in operating costs, for example, real estate and labour costs. The main non-economic factor was the removal of martial law which then led to a growing labour movement, an environment protection movement, political confrontation between the ruling party and the opposition parties, and a deterioration of public security. The resulting instability also contributed to the deterioration of the investment climate.

Multinational enterprises: The importance of properly assessing social, environmental and political risks in foreign direct investment projects

Due to the worsening business environment in Taiwan in the 1980s, many manufacturing enterprises, the majority being labour-intensive, small and medium-sized enterprises (SMEs), were moving out to other developing countries (Kao et al. 1992, p. 12). The major purpose for their overseas investments was to seek competitive advantages that had been lost in Taiwan.

Private foreign direct investment (FDI) made by Taiwanese firms in ASEAN countries was popular. From 1963 to 1993, the total FDI amount (excluding the FDIs in China which the Taiwanese government defines as indirect investments), approved by the Taiwanese government was US$4.02 billion. Of which 51 per cent (US$2.05 billion) was in the ASEAN countries (Huang et al. 1994, p. 36). The FDI in these countries reached its peak in 1991, when it reached US$703 million, then it declined from 1992 onwards. In 1992 the FDIs in ASEAN countries declined to US$289 million, and most of the recent overseas investments have been to China. From 1991 to 1993 the total FDI amount approved by the Taiwanese government was US$3.36 billion. Huge capital outflow into China has now forced the government to re-examine its policy with regard to China.

To understand the stream of FDI from Taiwanese manufacturing SMEs, this paper examines the FDI determinants and significant variables involved in the FDI decision processes of Taiwanese manufacturing SMEs and explores the implications for the Taiwanese owner managers, the Taiwanese government and the interested host countries and companies.

A foreign direct investment is a term which is sometimes used interchangeably with terms such as foreign investment and overseas investment. In this context it is defined as either equity or capital investment by a Taiwanese company in a new or existing overseas enterprise. A portfolio, for example a stock investment, would not be considered as an FDI. They are external environments surrounding an SME, the networks around owner managers and the owner managers' background. From a long-term view, these factors will influence each other.

An SME is surrounded by international, national and task environments. Changes from these environments may cause the SME to adopt new strategies to adapt to new circumstances (Bourgeois and Eisenhardt, 1988; Hitt ...