Forecasting foreign direct investment by using bass diffusion model integrated with genetic algorithms

Bi-Huei Tsai*

*Corresponding author for this work

Research output: Chapter in Book/Report/Conference proceedingConference contributionpeer-review

Abstract

The evolution of industrial clusters is a critical factor in the strategic development of locations for high-tech industries. Most previous studies have seldom quantified the location selections of Taiwanese IC design firms engaging in foreign direct investments in China because their access to crucial data may have been limited. This work developed a novel diffusion model to illustrate the extension of IC design clusters from Taiwan to China and chose foreign direct investment (FDI) as a quantitative indicator to measure the size of Taiwanese IC design industrial clusters in different Chinese regions. This study aims to understand what the distinctions in the process of FDI implementation are among the Taiwanese IC design companies which choose different Chinese regions to engage in FDIs. We also modified the conventional Bass model by optimizing parameters using genetic algorithm (GA) in conjunction with nonlinear least square method. The simulation is iterated 3,000 times. Finally, t-statistics were used to compare clustering features between the eastern and southern China areas. Simulation results demonstrate negligible standard deviation in the optimized parameters, which confirms the reliability of our findings. Furthermore, comparison results demonstrate that the Bass model optimized by GA integrated with NLS approach is more stable and accurate than the Bass model optimized by GA. The proposed approach is applicable to other high-tech industries and other locations around the world.

Original languageEnglish
Title of host publicationProceedings - 2014 5th International Conference on Intelligent Systems Design and Engineering Applications, ISDEA 2014
PublisherInstitute of Electrical and Electronics Engineers Inc.
Pages507-510
Number of pages4
ISBN (Electronic)9781479942619
DOIs
StatePublished - 4 Dec 2014
Event2014 5th International Conference on Intelligent Systems Design and Engineering Applications, ISDEA 2014 - Zhangjiajie, Hunan, China
Duration: 15 Jun 201416 Jun 2014

Publication series

NameProceedings - 2014 5th International Conference on Intelligent Systems Design and Engineering Applications, ISDEA 2014

Conference

Conference2014 5th International Conference on Intelligent Systems Design and Engineering Applications, ISDEA 2014
CountryChina
CityZhangjiajie, Hunan
Period15/06/1416/06/14

Keywords

  • Diffusion model
  • Forecast accuracy
  • Genetic algorithms
  • Nonlinear least square
  • Oordinary differential equation

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