ABSTRACT
A distinctive feature of foreign direct investment (FDI) patterns adopted by Taiwanese firms is the important role of network relationships. Traditional theory asserts that FDI is an attempt by large and powerful firms to exploit economic rent in a foreign market (Caves 1971). In Taiwan, however, relatively small firms defy traditional theory by investing abroad without any apparent firm-specific advantage to generate economic rent, since their investment is governed by a desire to preserve, exploit, and expand the network relationships with their buyers and suppliers (Chen and Chen 1998). They take advantage of network resources to overcome their shortage of internationalization assets, maintaining access to Taiwan's local networks to support their overseas operations, and seeking to establish linkages with domestic networks in the host nation to enhance production efficiency and to improve their position in the international markets.
