Taiwanese Foreign Direct Investment in Southeast Asia: An Empirical Investigation of the OLI Framework

Abstract

Foreign direct investment (FDI) is critical in the economies of both developing and developed countries. FDI is a new trend in emerging markets. The purpose of this study is to investigate entry mode choice through Dunning’s eclectic paradigm within an ownership, location and internalization (OLI) framework, which is useful for explaining foreign investment activities. The data in this study were extracted from the Taiwanese electronics industry’s FDI in Southeast Asia (Indonesia, Malaysia, the Philippines, Singapore, and Thailand) from 1997 to 2009. The results of the logistic regression analysis show that OLI factors influenced the choice of FDI entry modes. The ownership factors of international experience and firm size led to wholly-owned investments. The location factor of the complete infrastructure of communication in the host countries led to joint ventures. Finally, the internalization factor of cultural distance between the home and host countries led to wholly-owned investments. The results also confirm the contribution of the eclectic paradigm and the OLI factors to successful international business investment.