Domestic Repercussions of Different Types of FDI: Firm-Level Evidence for Taiwanese Manufacturing

SummaryThis paper addresses the public concern of hollowing-out effects of FDI by analyzing firm-specific data on Taiwanese manufacturing multinationals. We estimate ordered probit models with the firms’ own assessment of domestic production and employment effects as dependent variables to investigate whether such effects depend on the size, location, and type of FDI. We find that the probability of negative effects increases slightly with the size of FDI. Furthermore, the effects of locating in China differ from those of locating in advanced countries. In contrast to vertical and export-platform FDI, employment effects of horizontal FDI tend to be positive.