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The role of labour unrest and skilled labour on outward foreign direct investment in Taiwan, Republic of China, ROC

Published online by Cambridge University Press:  01 January 2023

Yu Cheng Lai  and
Santanu Sarkar Open the ORCID record for Santanu Sarkar [Opens in a new window]
Yu Cheng Lai
Affiliation:
Shih Chien University, Kaohsiung, Taiwan
Santanu Sarkar*
Affiliation:
XLRI Xavier School of Management, Jamshedpur, India
*
Santanu Sarkar, XLRI Xavier School of Management, XLRI Jamshedpur School of Business and Human Resources, C H Area East, Jamshedpur 831035, India. Email: [email protected]
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Abstract

This paper builds an estimation model to test whether improved labour standards necessarily lead firms to send work offshore to countries with lower wages and fewer employment protections; or improved labour standards influence the labour market, where with time, firms attract more skilled workers, which help deter outward foreign direct investment (FDI). When more firms comply with improved labour standards, the industrial relations climate also improves as non-compliance usually causes labour unrest. Using a model built on pooled cross-sectional time-series data from 2008–17, we studied the role of changes in labour unrest and the percentage of skilled workers in the labour force in predicting outward FDI in Taiwan. Per our estimation model, we found the percentage of skilled workers steadily increased as Taiwan maintained improved labour standards. The increase in skilled workers also increased labour costs making it challenging for firms to stay onshore. However, skilled workers helped firms improve productivity, which justified increased labour costs. As a result, firms in Taiwan that complied with labour standards found it less challenging to pay higher wages and stayed onshore.

Keywords

Outward foreign direct investmentlabour unrestskilled workerswagesTaiwanJ28J38F66
Type
Industry, skills and investment
Information
The Economic and Labour Relations Review , Volume 33 , Issue 2 , June 2022 , pp. 396 - 414
Copyright
Copyright © The Author(s) 2021

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