Host Government Incentives and MNE Strategy for Market Entry: The Case of the CHIPS and Science Act and TSMC’s U.S. Market Entry

How do government incentives attract leading MNEs, and what strategies do these firms adopt to secure key resources for successful entry? The U.S. CHIPS and Science Act of 2022 aims to boost domestic semiconductor production, including through attracting foreign investment. Using TSMC’s U.S. entry as a case study, we find that government incentives facilitated entry by lowering the liability of foreignness. However, the MNE’s reliance on established management practices, rooted in technological superiority, created difficulties in meeting host-country expectations, particularly in securing skilled labor. This highlights the importance of combining host government incentives with MNEs’ strategic flexibility for successful market entry.