Original Article Internationalization of Taiwanese manufacturing firms: The evolution of subsidiary mandates and capabilities Received 2 March 2012; revised 29 June 2012; accepted 20 July 2012 Homin Chen a,b, *, Chia-Wen Hsu c and D’Arcy Caskey b a Commerce Development Research Institute, 4F, No. 303, Sec. 1, Fu-Xing South Road, Taipei 106, Taiwan. b Department of International Business, National Taiwan University, 85, Sec. 4, Roosevelt Road, Taipei 106, Taiwan. c Department of Business Administration, National Chung Cheng University, No. 168, University Road, Min-Hsiung Chia-Yi, Taiwan. *Corresponding author. Abstract We explore the internationalization of Taiwanese manufacturing firms by studying the evolutionary trajectories of their subsidiaries. Building upon the literature, we formulate and apply dimensions capability development and mandate expansion to explain the evolutionary paths of Taiwanese foreign direct investment. Subsidiaries are categorizable into groups from low to high performance: Pure Implementer, Capability Contributor, Mandate Extender and Global Innovator. Using data from Taiwanese firms’ foreign expansion, we find that subsidiaries with longer host-country experience and founded by parent firms with higher geographic dispersion are more likely to expand their mandates and/or develop new capa- bilities, which in turn lead to better subsidiary performance. Asian Business & Management (2013) 12, 37–60. doi:10.1057/abm.2012.29; published online 10 October 2012 Keywords: internationalization; subsidiary mandate; capability development Introduction As one of the ‘newly industrialized economies’ (NIEs), Taiwan has seen rapid economic growth and a remarkable transformation into an important source of foreign direct investment (FDI). According to the United Nations Conference on Trade and Development’s (UNCTAD) World Investment Report 2011, r 2013 Macmillan Publishers Ltd. 1472-4782 Asian Business & Management Vol. 12, 1, 37–60 www.palgrave-journals.com/abm/