Strengthening Taiwan Investment in the United States Through Strategic Alliance of Small and Medium Enterprises

Strengthening Taiwan Investment in the United States Through Strategic Alliance of Small and Medium Enterprises

In this paper, we analyzed the Taiwan economic risks due to its heavy and increasing economic dependence on mainland China in last two decades, where Taiwan foreign direct investment (FDI) in mainland China has been mainly from small and medium enterprises (SMEs) with an average of about US $ 2 million per case in recent years. In the consideration of the unsuccessful outcome by Taiwan government's policy for diverting Taiwan FDI from mainland China to the South and East Asian countries in the past, we proposed a geographical portfolio of increasing Taiwan FDI in the United States. In view of the fact that the United States has not been as enthusiastic as Taiwan to discuss the Free Trade Agreement (FTA), there is a need for strengthening Taiwan FDI in the United States.
The overseas investment by Taiwan SMEs per case has been relatively quite small, which could not compete with a large scale of FDI in the United States by multinational corporations such as Japan and European countries. Therefore, we recommended a strategic alliance of Taiwan SMEs in order to increase the economy of scale. There are two forms. One is the formation of a holding company with the participation of SMEs as shareholders. The other is the formation of several SMEs as the satellite industries under the leadership of a multinational corporations. Taiwan government can provide both financial and logistic support to assist with the formation of SMEs strategic alliance.