dc.description.abstract | Theories of heterogeneous firms and international trade have emphasized the role of productivity played on decisions of exports and foreign direct investment (FDI), while studies considering how productivity affect both decisions of exports and FDI remain limited. Internationalization strategies of exporting, FDI and both behaviors are prevailing in manufacturing firms in Taiwan. Thus, this thesis examines how total factor productivity (TFP) differentiates firms’ internationalization strategies among exporting, FDI, and both strategies. Based on a firm-level panel dataset of manufacturing firms listed on stock market and adopting the panel multinomial logit model to implement empirical estimations, empirical results are as follows. We find that, without controlling for firm characteristics, highest productivity firms undertaking both exporting and FDI, followed by firms undertaking FDI and firms engaging in exports, whereas lowers productive firms serve only domestic market. After controlling for firm characteristics and industry and time fixed effects, results change moderately. Most productive firms undertake both exports and FDI, followed by firms engaging in exports; while low productivity firms undertake FDI or serve the domestic market and there is no significant difference in TFP in both groups. These findings contradict theoretical arguments in Helpman et al (2004). The possible interpretation is that Taiwan’s FDI concentrate on defensive FDI toward China to exploit low production costs. China government provides various policy instruments, adding share similar language and culture, helping lower sunk costs of FDI. Thus, the productivity threshold of FDI is low, enabling low productivity firms to undertake FDI. Various measures of TFP obtain similar results, ensuring robustness of estimating results. | en_US |