Political Economy of Cross-Strait Investments: The Taiwanese High-tech Industry as an Example

Abstract

The data analyzed in this paper revealed that Taiwanese high-tech companies that invested in China have grown larger. Industrial clusters have been established in the Greater Shanghai area and to a lesser extent, along the Shenzhen-Dongguan-Guangzhou corridor. These clusters were established along the principles of vertical differentiation. Will the post-ECFA China-Taiwan relations create the Chiwan phenomenon or will it present Taiwan with a prisoners dilemma? The paper proposes that in taking advantage of Chinas huge domestic market, Taiwanese high-tech enterprises should maintain their comparative advantage in the world ICT market. In terms of production functions, aside from capital, innovation-driven human resource is perhaps equally, if not more, important in maintaining enterprise profitability and sustainability.