Chen, Liang-Chih (2016) Building industrial systems in China: The networking of Taiwanese machine tool firms in China. In J.-H. Wang and R.-M. Hsung (Eds), Rethinking Social Capital and Entrepreneurship in Greater China, Routledge.
Introduction Rising production costs and shrinking markets have been driving global manufacturers to invest in China to exploit its abundant low-cost production resources and huge market (Zweig 2002; Ito 2009). In the case of Taiwan, since the 1980s, many export-oriented manufacturers have joined this trend by relocating a significant share of their production from Taiwan to China (Hsu and Chen 2011; Sadoi 2011). Studying Taiwan’s direct investment in China shows that, compared with investors from elsewhere, Taiwanese investors are smaller in scale and are mostly involved in networks of production organization rather than vertically integrated (Hsing 1996; 1998; Brookfield and Liu 2005; Hsu and Chen 2011). Additionally, in their investment processes, Taiwanese manufacturing firms mainly employ the “hens lead chicks” strategy, in which they invite their Taiwanese suppliers to participate in their China ventures. And the ability to work with their familiar partners in remote sites enabled the smooth and successful transplantation of production systems from Taiwan to China (Hsing 1998; Cheng 1999; Wang and Lee 2007).