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Investment Timing and

Performance: Further Evidence

Research Purposes
FDI theories answer Why, What, Where and
How but not When questions. The purposes
of this research are to examine
The determinants of Taiwanese
investment in Mainland China at different
Whether the early investors perform better
than do the later investors;
Additional objective: Does industry matter?
Literature Review (1)
Dunnings three pillars has been used
extensively: ownership, location and
internalization advantages;
+ network theory, strategic intents;
Time element has not yet been seriously

Literature Review (2)
Conceptually, in real world, a CEO has to
decide when to invest, now or later and
whether the decision is good or bad will
then be evaluated by future performances.
Empirically, researchers ask similar
A gap between conceptual and empirical
perspectives: prior vs. posterior.
Literature Review (3)
Prior perspective:
The CEO collects information: internal and
external, SWOT, ----
Uncertain, risk: unknown, unpredictable and
uncontrollable elements;
Animal spirit - CEOs or Top managements gut

Literature Review (4)
Posterior perspective
Like evaluating a leaders decision: Jorge
Washington, Lincoln, Clinton, Mao Zedong,
Chiang Kai She, Jack Welch, ----
Evaluating Bushs decision in evading Iraq:
What determine Bushs decision?
Was the decision good or bad?
Issues: What criteria? Evaluating periods

Literature Review (6)
Research questions:
The determinants of investment in 1990 and
Performances of early and later investors

Literature Review (7)
Ownership Advantages indicate a firms
organizational capability that encourages a
firm to invest earlier than do the other firms
that do not own the advantages. These
advantages include
the size of ssets (Tan,Vertinsky, 1996; Blandon, 1999;
Gaba,Pan,Ungson, 2002; Leung et al, 2003Raff & Ryan, 2006),
advertising (Tan & Vertinsky, 1996),
R&D expenditure (Tan & Vertinsky, 1996; Raff &Ryan, 2006),
Export ratio (Tan & Vertinsky, 1996; Raff,Ryan, 2006),
International experience (Gaba et al, 2002; Leung et al, 2003;
Blandon, 1999),
Profitability (Tan & Vertinsky, 1996),
Asset mobility (Tan & Vertinsky, 1996; Leung et al, 2003),
Ability of vertical integration (Tan & Vertinsky, 1996),
Degree of diversification (Raff & Ryan, 2006) and
Economy of scope (Gaba et al, 2002).
Literature Review (8)
Internalization Advantages, which
indicate how a firm enters foreign market,
Entry mode (Gaba et al, 2002; Pennings &
Slenuwaegen, 2004),
Network relation (Tan & Vertinsky, 1996; Raff
& Ryan, 2006).
Literature Review (9)
Location advantages, which indicate the
attractiveness or risks of a host country a
firm plans to enter, include
Market centrality (Tan & Vertinsky, 1996),
Market niche of host country (Tan & Vertinsky, 1996;
Mitra & Golder, 2002, Raff & Ryan, 2006),
Risk of host country (Gaba et al, 1996; Leung et al,
Growth of Product (Gaba et al, 1996; Raff & Ryan,
Trade volume (Leung et al, 2003),
The number of firms enters earlier (Tan & Vertinsky,
1996; Baba et al, 2003).
Literature Review (10)
Performance indicators:
Profits, either ROI or ROA (Luo, 1998; Pan
et al, 1999; Pan & Chi, 1999);
Market share (Pan et al, 1999; Delios &
Makino, 2003);
Survival rate (Delios & Makino, 2003);
Waiting time for making profits (Leung et
al, 2003).
Literature Review (11)
Other Determinants of performance:
Entry mode (Luo, 1998; Pan et al, 1999; Pan & Chi, 1999; Delios
& Makino, 2003),
Asset (Pan et al, 1999; Leung et al, 2003; Delios & Makino, 2003),
Utilization rate of asset (Pan et al, 1999; Pan & Chi, 1999),
Total investment (Pan & Chi, 1999),
Characteristics of Asset (Delios & Makino, 2003),
Diversification degree (Luo, 1998; Delios & Makino, 2003),
Export ratio (Pan & Chi, 1999; Luo, 1998)
International experience (Delios & Makino, 2003)
Industry concentration (Pan et al, 1999),
Investment location (Luo, 1998; Pan et al, 1999; Pan & Chi, 1999),
Market penetration (Leung et al, 2003),
Total investment from home country (2003),
Total export from home country (Drake & Caves, 1974? ).
Model Specification (1)
For investment timing: two ordered probit
For traditional industry:
Dependent variable: three investment periods: early,
second early and later periods
For electronics industry:
Dependent variable: two periods: early and later periods;
Independent variables: firm characteristics,
location factors (Taiwan and China),
Internalization factors
Model Specification (2)
For timing and performance: OLS
Dependent variable: value added per
employee and rate of return of total assets
Independent variables: location factors, firm
Results (1)
Traditional and electronics industries are
different in investment timing;
The factors that postponed investment in
Technology purchase
Results (2)
Investment timing is a negative factor to the
rate of return, but it is negative but not
significant to the value added per employee.
The aggregate environment risk is important
in explaining the time effect on corporate
performance with control of other firm
The differences between traditional and
electronics are different, revealing in
various factors.
China is an important in global and Taiwan
economies, and the globalization of
Taiwanese firms.
This research is an additional contribution
to the increasing but still limited researches
in China.
Time factor is closely related to the risk of
location environment.
Industry matters in investment timing.
Limitations & Suggestions
Limitations: the usefulness of posterior
research is limited.
Case studies
Longer period (example: Giant in the U.S.)
Multiple criteria incorporating with strategic
More details in environmental factors for both
home and host countries