||The Correlation between the Performance of Parent Company in Taiwan and its Subsidiary in Mainland China: A Study of the Automobile Industry
||The Correlation between the Performance of Parent Company in Taiwan and its Subsidiary in Mainland China: A Study of the Automobile Industry
||Institute of International Management (IIMBA--Master)(on the job class)
Foreign direct investment
Simultaneous equation model
While Mainland China remains as the largest foreign direct investment (FDI) host country among all developing nations, the nearby Hong Kong and Taiwan are the two dominating sources of manufacturing FDI. This study aims at understanding the factors that determine the performance of automobile industry in Taiwan and the factors that determine the performance of its subsidiary (FDI) in Mainland China. Moreover, this study constructs a simultaneous equation model to analyze the correlation of these two explained variables.
The study using 14 Taiwan listed automobile industry companies as our research samples. Research result is as follows,
1. Performance of automobile industry in Taiwan will increase along with the upsurge of GDP growth rate of Taiwan, Wholesale price index of Taiwan, Performance of subsidiary in Mainland China. Contrarily, performance of automobile industry in Taiwan will be decreased along with the increase of population of Taiwan.
2. Performance of subsidiary in Mainland China will increase along with the upsurge of average manufacturing industry wage of China, performance of automobile industry in Taiwan. Contrarily, the performance of subsidiary in Mainland China decreased along with the wholesale price index of Mainland China.
3. The result of simultaneous equation indicated that there was a positive correlation between performance of automobile industry in Taiwan and the endogenous variable of the subsidiary’s performance in Mainland China, and it did reach significant level.
The finding suggesting that performance of subsidiary in Mainland China was the most significant variable in explaining the performance of automobile industry in Taiwan. Other evidence showed that type of automobile industry (completed car assembly and auto-parts industry) had no significant effect on the ability of making profits in Taiwan and in Mainland China. Managerial implications for the automobile industry in cross-strait and the future prospects of automobile industry in Taiwan and Mainland China are discussed.
TABLE OF CONTENTS IV
LIST OF TABLES IX
LIST OF FIGURES XII
CHAPTER ONE INTRODUCTION 1
1.1 Research Motivation 1
1.2 Research Objective 3
1.3 Research Field 4
1.4 Research Process and Frame 4
CHAPTER TWO LITERATURE REVIEW AND DISCUSSION 7
2.1 Literature Review 7
2.1.1 Literature with Reference to Automobile Industry 7
2.1.2 Literature with Reference to Foreign Direct Investment 13
2.1.3 Literature with Reference to Organization Performance 21
2.2 Discussion of Related Literature 30
2.2.1 Research Content 30
2.2.2 Research Method 32
2.2.3 Research Objectives 33
2.3 Research Intention and Direction 33
CHAPTER THREE INTRODUCTION OF THE AUTOMOBILE INDUSTRY 36
3.1 The Definition and Elements of the Automobile Industry 36
3.1.1 Definition of the Automobile Industry 36
3.1.2 Elements of the Automobile Industry 37
3.1.3. Future Development of the Automobile Industry 39
3.2 Automobile Industry Introduction - Taiwan 40
3.2.1 Present Situation of Taiwanese Automobile Industry Market 43
3.2.2 The Development of Taiwan Automobile Industrial Strategy 48
3.2.3 Taiwan Automobile Industry Investment Situation in Mainland China 50
3.3 Automobile Industry Introduction - Mainland China 52
3.3.1 An Overview of Mainland China’s Automobile Industry 53
3.3.2 An Overview of the Automobile Component Market of Mainland China 55
3.3.3 Future Development of Mainland China Automobile Industry 57
3.4 The Effect of RMB Appreciations on Cross-strait Automobile Industry 60
CHAPTER FOUR RESEARCH METHODOLOGY 63
4.1 Sample 63
4.2 Research Method 65
4.2.1 Detection of Multicollinearity 66
4.2.2 Significant Test 67
4.2.3 Detection of Heteroscedasticity 67
4.2.4 Detection of Autocorrelation 68
4.2.5 Ordinary Least Square, OLS 69
4.3 Variable Measures 69
4.3.1 Variable that Affects Taiwan Automobile Companies and its Subsidiaries’ Performance 70
4.4 Empirical Econometric Model 77
4.4.1 The Empirical Model of Taiwanese Automobile Industry Company’s Performance 77
4.4.2 The Empirical Model of the Performance of Taiwan Automobile Industry’s Subsidiary in Mainland China 79
4.4.3 The Correlation Between the Performance of Taiwan’s Automobile Industry and Its Subsidiary in Mainland China 80
CHAPTER FIVE RESEARCH METHODOLOGY 82
5.1 The Empirical Research of Performance of Automobile Industry in Taiwan 82
5.1.1 Detecting the Multicollinearity 82
5.1.2 Nested Hypothesis 84
5.1.3 Detection of Heteroscedasticity 85
5.1.4 Durbin Watson d Test Checking Autocorrelations 86
5.1.5 Empirical Multiple Regression Model of the Performance of Automobile Industry in Taiwan 86
5.2 The Empirical Model of the Performance of Subsidiary in Mainland China 89
5.2.1 Detecting the Multicollinearity 90
5.2.2 Nested Hypothesis 92
5.2.3 Detection of Heteroscedasticity 92
5.2.4 Durbin Watson d Test Checking Autocorrelations 93
5.2.5 Empirical Multiple Regression Model of the Performance of Subsidiary in Mainland China 94
5.3 Correlation between the Performance of Automobile Industry in Taiwan and Its Investment in Mainland China 97
CHAPTER SIX CONCLUSION AND SUGGESTION 101
6.1 Conclusion and Implications 101
6.1.1 Conclusion and Implication from the Result of the Performance of Automobile Industry in Taiwan 102
6.1.2 Conclusion and Implication from the Result of the Performance of Subsidiary in Mainland China 104
6.1.3 Conclusion of Simultaneous Equation Model of the Performance of Automobile Industry in Taiwan and its Subsidiaries in Mainland China 105
6.2 Suggestion 109
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