• East Asian Economic Review
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• v.25 no.2
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• pp.151-174
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• 2021

This paper empirically examines whether and how inward foreign direct investment (FDI) affected industrial productivity in Korea during the 2000-2016 period, based on dynamic panel data of inflow FDI on an arrival basis from 427 manufacturing industries. The paper adds to the literature by analyzing whether both technology spillovers and industrial restructuring from inward FDI can differ according to industrial characteristics such as capital intensity, imported intermediate inputs, and tariffs. The empirical results show that the overall effects of inward FDI on total factor productivity (TFP) were statistically insignificant in general. However, the positive effects of inward FDI on productivity became statistically significant for industries with lower tariffs. Capital intensity were not involved in the relationship between inward FDI and productivity. Thus, the paper highlights that the results in previous studies with inward FDI on a notification basis were overestimated and inward FDI policies in Korea should focus on channels such as trade liberalization and the redistribution of production factors rather than capital accumulation.

• Journal of Korea Trade
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• v.24 no.1
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• pp.35-58
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• 2020

Purpose - This study examines the determinants of foreign direct investment (FDI) location choice for Chinese firms, focusing on the agglomeration effect for firms of the same nationality. Design/methodology - The empirical data are China's inward FDI from the top 19 economies (excluding tax havens and Taiwan) in terms of FDI during 1997-2015 and China's outward FDI from the top 18 economies (excluding tax havens). This study uses a random effects generalized least squares model for panel data analysis. Findings - The results confirm that both host countries' costs and market conditions and the degree of agglomeration affect these countries' attractiveness for FDI inflows. Specifically, agglomeration has a significant effect on China's inward and outward FDI. This study confirms that the agglomeration of firms of the same nationality has predictive power for multinational enterprises' FDI location choices. The host countries' real GDP and trade openness also positively affect FDI inflows. Interestingly, however, China's production cost has a positive effect. Thus, inward FDI aimed at entering the Chinese market is increasing in recent years relative to the previous efficiency-seeking FDI. Inward FDI in China is therefore the market-entry type, whereas outward FDI by Chinese firms is the market-oriented type. Originality/value - These results suggest that the effects of the potential determinants of Chinese outward FDI are similar to those of inward FDI as China's trade liberalization progresses.

• Korea Trade Review
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• v.44 no.1
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• pp.87-99
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• 2019

Recently there are sharp increase in number of studies related with facilitation of Inward-FDI or Multinational Enterprises invested in Korea region. The most of studies are mainly purposing to survey - 1)how Korea Government makes counter plan and assistance policy to make foreign capital and Inward-FDI more attractively and aggressively, 2)what is the new framework or system for Inward-FDI policy, 3)what is economic effect of Inward-FDI, 4)what are determinants or conclusive factors of FDI in Korea. Under this situation, the goal of this report is to find out the new way for Multinational Enterprises to reinvest continuously thru getting their better investment performances on several factors including Marketing Competence, Management Ability, Localization Management Skill, Business Management Strategy, and R&D Competitiveness which would be much more important determinants influencing re-investment of Multinational Enterprises in Kora. This report based on the empirical result and comprehensive analysis will eventually help policy makers to implement the appropriate strategy and support Multinational Enterprises to proceed positive circle's re-investment activity in the end.

• International Commerce and Information Review
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• v.16 no.4
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• pp.151-167
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• 2014

The aim of this study is to examine the relationship between globalization and income distribution in Korea. In order to identify the key determinants, the study investigates the effects of trade openness, inward and outward FDI flows, and per capita GDP on income distribution. The study uses methodology of unit root and co-integration technique as well as an error correction model over 1992 to 2011 by using annual data. The empirical findings showed that income inequality is reduced as trade openness and the per capita GDP increase. Meanwhile, income inequality is deteriorated as inward and outward FDI flows increased. In addition, the study revealed that the negative effect of inward FDI flows on income inequality is greater than that of outward FDI flows. This result supports the Feenstra and Hanson (1997) hypothesis. Overall the globalization process can be beneficial for the Korean economy, but its nature should be closely monitored regarding income distribution.

• Journal of Korea Trade
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• v.24 no.3
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• pp.55-72
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• 2020

Purpose - In this paper, we provide recommendations for Korea's long-term direction and strategic measures to attract inward foreign direct investment (FDI) in response to Japan's export regulations. In doing so, we analyze the current situation and characteristics of trade between Korea and Japan, focusing on the parts and materials industry, which is particularly affected by Japan's trade regulations. Design/methodology - Based on the analysis of five successful inward FDI cases (e.g. Toray, IGK, Delkor, GlobalWafers, DuPont) and statistic trend review in the parts and materials industry, we consider various factors pertaining to successful inward FDI in Korea and propose valuable investment attraction strategies. Findings - For a successful investment attraction strategy, we studied some statistical trends in the internal and external environments of the parts and materials industry and successful investment attraction cases in Korea. We have found that in order to increase the probability of success in attracting investment, we need a mid-to long-term strategy considering multiple factors such as "Production-oriented, Demand-linked, Global Value Chain (VGC) linked, and Policy-linked investment attraction." Originality/value - We suggest several specific measures and important strategic implications for the Korean government and firm's managers to attract inward FDI successfully.

• The Journal of Asian Finance, Economics and Business
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• v.8 no.11
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• pp.31-39
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• 2021

This study empirically examines the proposition that the domestic fundamentals of a nation can emerge as absorptive capacity factors to reap the benefits of inward FDI. The study is contextualized in Asia, set from1982 to 2017, and data is grouped into low-income and lower-middle-income economies, in comparison to high-income and upper-middle-income economies, catering to different geographical regions within Asia. The investigation is based on a series of absorptive capacity factors such as infrastructure, human capital, domestic credit, and health indicator. The methodological analysis is premised on dynamic panel structure and employs the Generalized Method of Moments (GMM) estimation technique. The empirical findings suggest that that the infrastructure variable appears to be the major absorptive capacity factor for both groups of countries. The health indicator, on the other hand, can help reap the benefits of inward FDI, but only if the threshold level is met. The selected economies must achieve this threshold level to reap the benefits of FDI. To absorb the benefits of inward FDI, countries must be proactive in providing sound infrastructure and implementing proper healthcare measures.

• The Journal of Asian Finance, Economics and Business
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• v.8 no.12
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• pp.283-293
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• 2021

To verify the employment impact of two-directional FDI, the study analyzes panel data composed of 26 OECD countries from 2006 to 2018 by using the system GMM. Furthermore, we decompose domestic employment into types of industries and skill compositions to identify the heterogeneous employment impact. The results show that inward and outward FDI at lag one period promote domestic employment at the overall level. In terms of workers' skill levels, lagged inward FDI significantly persistently promotes high-skilled workers' employment, likewise, the positive employment impact also appears with a time lag in low-skilled labor subgroups. Outward FDI, on the other hand, initially inhibits both high- and low-skilled labor demand, but then changes to a positive effect in the highskilled labor subgroups. Although there is a time difference between inward and outward FDI, it has a significant and positive impact on employment in the manufacturing and service industries. The results indicate that the relationship between manufacturing and service employment is a mutual substitute. To attract international investors, governments should promote a favorable investment climate and maintain stable economic growth. Because low-skilled labor is more susceptible to changes in FDI, policy measures are required to ensure employment stability.

• East Asian Economic Review
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• v.17 no.4
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• pp.417-444
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• 2013

This paper aims to empirically identify the effects of FTAs on outward and inward FDIs in Korea. Considering the income differences between Korea and its FTA partners, we hypothesize that FTAs have a positive effect on outward FDI to developing countries and inward FDI from developed countries. An underlying source of the hypothesis is the Knowledge-Capital model, addressing the positive (negative) relationship between trade costs and horizontal (vertical) FDI. We test for the hypothesis using data on Korea's FTAs and FDI over the period 2000-2010. We find that our empirical results support the hypothesis, and additionally, FTAs in general encourage FDI by creating an FDI-friendly environment.

• International Commerce and Information Review
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• v.14 no.4
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• pp.27-47
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• 2012

The study aims to analyze how the variables for Korea, such as the exports, imports, FDI(Inward) and FDI(Outward), influence the economic growth and how they affect each other. For the purpose of empirical analysis, this paper used the quarterly time series data from 1980 to 2010, dividing the period before and after 1997(IMF). The variables used in this study were log-transformation from the original variables. This study empirically tests the relationship among variables by using VECM with considering the time-series properties of each variable. The results found from the study are as followings. Causality analysis using VECM proved that no causality between GDP and exports existed, whereas causality between GDP and FDI(Inward) existed, in which GDP affected FDI(Inward) since IMF. However, it was found that other periods and FDI(Inward) did not affect GDF and had no causality among them.

• The Journal of Asian Finance, Economics and Business
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• v.9 no.9
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• pp.143-156
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• 2022

This article examines the effect of inward foreign direct investments (FDI) on the export performance of micro, small & medium enterprises (MSMEs) in India, and investigates the spillover impact and absorption capacity of the MSMEs sector. For the first time, the researchers applied the intersectoral linkage approach to investigate the matter and used a panel dataset between 2006 and 2017. The coefficients of forward and backward linkages are estimated by using the Rasmussen method, the study employs a basic linear panel data model, followed by various diagnostic tests to identify the problem of heteroscedasticity, autocorrelation / serial correlation, cross-sectional dependencies, multicollinearity, time-individual specific tests, and unobserved effects. The PCSE model was applied for robust standard error and the Hausman-Taylor IV model to check the robustness of the result generated in the linear panel data model. Despite the high prevalence of forward and backward intersectoral connections and the Lack of absorption capacity of local firms, the results show that FDI has little of an impact on the export performance of micro, small, and medium-sized businesses in India. This study adds to the existing literature on determining local firms' spillover effect and absorption capacity in response to inward FDI.