Political Economy of Cross-Strait Investments: The Taiwanese High-tech Industry as an Example

The data analyzed in this paper revealed that Taiwanese hightech companies that invested in China have grown larger. Industrial clusters have been established in the Greater Shanghai area and to a lesser extent, along the Shenzhen-Dongguan-Guangzhou corridor. These clusters were established along the principles of vertical differentiation. Will the post-ECFA China-Taiwan relations create the "Chiwan" phenomenon or will it present Taiwan with a "prisoner's dilemma"? The paper proposes that in taking advantage of China's huge domestic market, Taiwanese high-tech enterprises should maintain their comparative advantage in the world ICT market. In terms of production functions, aside from capital, innovation-driven human resource is perhaps equally, if not more, important in maintaining enterprise profitability and sustainability.