How Does Overseas Activity Affect Parent Employment in Newly Advanced Economies? Evidence from Taiwan

This paper explores the effects of overseas activity on parent firm employment in a panel of Taiwan’s large, listed firms during 2000-2005. Propensity score matching estimates of discrete effects suggest that employment growth did not differ significantly between new parents and firms with no overseas operations. Generalized method of moments’ estimates of marginal effects for all firms indicate that, on average, there was a statistically significant and positive correlation between the size of overseas investment and parent employment after accounting for other factors thought to influence firm employment (wages, capital stocks, size, technology intensity, export propensity, and productivity). However, this positive correlation was limited to electronics parents and investment in China. Correlations were negative and significant for electronics parents investing in advanced economies and other manufacturers investing in China, and insignificant for other manufacturers investing in advanced economies. These findings contrast with common perceptions that overseas activity, especially in China, has reduced parent employment.