Fortress in the Air: The Organization Model of Taiwanese Export-Manufacturing Transplants in China

Foreign direct investment (FDI) plays a salient role in the export-manufacturing sectors that have propelled China's rapid economic growth for the past two decades. In China, foreign transnational corporations, especially those from Taiwan and Hong Kong, rather than newly founded or reoriented domestic firms, occupy a strategic position connecting China's coastal regions with global capitalism. The economic, legal-institutional, and cultural explanations of China-bound FDI focus upon one specific group of factors pertaining to the domestic environment. In contrast to these one-dimensional views of the environment, this paper borrows insights from economic sociology and organization analysis to propose a 'fortress-in-the-air' model as an ideal type representing the way Taiwanese-invested enterprises (TIEs) in export-manufacturing sectors organize their business in response to demands from both the institutional environment of China's transitional economy and the technical environment linking the activities of interconnected firms in a chain-like fashion to overseas markets. This paper uses Taiwanese-owned export-manufacturing transplants in China as cases through which to explore the organizational configurations of the fortress in the air model at the intra-, inter-, and extra firm levels to explain the interaction between TIEs and host regions and the implications for local development in China's coastal areas.