Intellectual property rights and FDI location choices: Evidence from Taiwanese outward FDI

This study was designed to report how a host country's intellectual property rights regimes affect Taiwanese OFDI location choices, as well as research whether investors can obtain economic revenues from property rights when they do various types of transactions through the formal legal systems. We analyzed the hypothesis by using Taiwan's OFDI data in 21 host countries during a total span of 17 years from 1998 to 2014. Even if a country has good formal legal institutions, if the informal institutional aspect of the legal field is not strong enough and cannot support its formal legal institutions, then it will not attract foreign companies to do FDI in that country. In addition, we analyzed the areas and industries that Taiwanese usually do OFDI in and discovered that a country ’s informal legal institutional aspect of the legal field has a moderate positive effect on the relationship between the FDI location choices and the formal legal institutions.