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

Abstract

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.