• Title/Summary/Keyword: Outward Foreign Direct Investment

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China's Outward Foreign Direct Investment Patterns: Evidence from Asian Financial Markets

  • HE, Yugang;CHOI, Baek-Ryul
    • The Journal of Asian Finance, Economics and Business
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    • v.7 no.2
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    • pp.157-168
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    • 2020
  • Since the economic crisis sweeps across the world in 2008, the foreign direct investment of various countries has been greatly impacted. Therefore, this paper regards China as an example to analyze China's outward foreign direct investment patterns in terms of Asian financial markets with a panel data over the period 2003-2017. We mainly focus on the money market oriented outward foreign direct investment and foreign exchange market oriented outward foreign direct investment. Using the individual fixed effect model to conduct empirical analyses, the empirical findings indicate that China will reduce its foreign direct investment amount to a country with large money supply and China will increase its foreign direct investment amount to a country with large foreign exchange reserves. Furthermore, when a country has signed Free Trade Agreement with China, China will increase more foreign direct investment amount to these countries than that of a country who has not signed Free Trade Agreement with China. Moreover, the empirical findings indicate that no matter what the money market oriented outward foreign direct investment or foreign market oriented outward foreign direct investment, China will reduce its foreign direct investment amount to these Asian countries due to the global economic crisis.

Estimating the Knowledge Capital Model for Foreign Investment in Services: The Case of Singapore

  • Chellaraj, Gnanaraj;Mattoo, Aaditya
    • East Asian Economic Review
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    • v.23 no.2
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    • pp.111-147
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    • 2019
  • Singapore's inward and outward investments with industrialized countries in both manufacturing and service sectors were skill seeking while outward investments to developing countries were labor seeking. Applying the Knowledge-Capital model, it was found that services Foreign Direct Investment is sensitive to skill differences. A ten-percent decline in skill differences with industrialized countries resulted in a 4.25 percent rise in inbound manufacturing and 1.48 percent rise in inbound services investments. Meanwhile, a ten-percent increase in skill differences with developing countries resulted in a 30 percent rise in outbound manufacturing and 0.38 percent rise in services investments. Furthermore, when services are distinguished by skill-intensity, the impact of relative skill endowments on inbound Foreign Direct Investment in skill-intensive services is significantly different from the impact on other services. However, when services are disaggregated by "proximity" needs, we do not find any significant difference in the impact of relative skill endowments on Foreign Direct Investment.

Investing Abroad, Transforming at Home: An Empirical Study of Outward Foreign Direct Investment and Korean Manufacturing's Servicification

  • Yonggeun Jung;Jung Hur
    • East Asian Economic Review
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    • v.28 no.2
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    • pp.143-174
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    • 2024
  • This paper empirically examines the relationship between outward foreign direct investment (OFDI) of Korean manufacturing firms and the servicification of domestic employment using a firm-level panel data. In this study, considering the issue of low productivity in the Korean service sector, we categorize service employment into core and non-core services and investigate their relationship with OFDI using the firm-fixed effects model. The empirical results show that the share of core service employment exhibits a positive correlation with the extensive OFDI. On the other hand, the share of non-core service employment, which is expected to generate relatively low value-added, does not show a significant relationship with the extensive OFDI. When we divide the samples based on host countries and the type of subsidiaries, the impact on servicification varies depending on the technological capabilities of host countries and their participation in global value chains. Our study suggests that Korean manufacturing firm's internationalization strategies may facilitate a transition from labor-intensive employment, like the cases in advanced countries, to technology-intensive employment through OFDI and other means.

Foreign Direct Investment Projects of Korean Companies

  • Choi, Yeana;Yuce, Ayse
    • The Journal of Asian Finance, Economics and Business
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    • v.3 no.1
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    • pp.5-14
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    • 2016
  • This paper investigates announcement effects of the outward foreign direct investment (FDI) projects of the Korean multinational companies. Although the FDI is considered corporate activity that can provide various benefits beyond financial resources, the most previous research focused on macro analysis such as country-level and industry-level analysis instead of the firm-level study, which is required to decide the investment project from a management perspective. Thus, this study examines the relationship between the outward FDI activities of the Korean corporations and their financial performance to fill the gap in this area.

Agglomeration Effects and Foreign Direct Investment Location Choice: Cross-country Evidence from Asia

  • Choi, Paul Moon Sub;Chung, Chune Young;Lee, Kaun Y.;Liu, Chang
    • 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.

Empirical Analysis of the Changes in the Patterns of Chinese Firms' Outward Foreign Direct Investment in the Belt and Road Initiative Countries (중국 기업의 일대일로 국가에 대한 해외직접투자 패턴 변화에 관한 실증연구)

  • Wonchan Ra;Zu-Kweon Kim
    • Korea Trade Review
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    • v.47 no.6
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    • pp.307-333
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    • 2022
  • In recent years, the outward foreign direct investment (oFDI) in the Belt and Road Initiative (BRI) by Chinese companies has significantly increased in size and changed in content. However, changes in the oFDI patterns between the pre- and post-BRI periods have not received sufficient attention from academia despite their theoretical and strategic significance. This paper reviewed existing research to establish seven hypotheses on changes in the oFDI patterns of Chinese companies investing in BRI countries and conducted empirical analyses to test the hypotheses using secondary data. The results showed that after the BRI agreement, Chinese oFDI in BRI countries was more active in less economically and less institutionally developed countries, that the oFDI by privately-owned enterprises (POEs) increased more than that of state-owned enterprises (SOEs), and that SOEs were more active in the social overhead capital (SOC) area while POEs were more active in the non-SOC area. The paper concludes with a summary, implications, and future research directions.

The Impact of Interfirm Linkages on Chinese MNEs' Entry into Foreign Markets

  • Su, Hang;Hong, Sungjin
    • East Asian Economic Review
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    • v.26 no.2
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    • pp.119-142
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    • 2022
  • This paper uses social network theory and the internationalization process model (IPM) to determine how external network linkages influence the location choices of multinational enterprise from emerging economies (EMNEs); specifically, whether past alliance experience influences location choices and its impact on the subsequent entry of MNEs from emerging economies. This paper applies survival analysis using initial and secondary investments from 2,000 Chinese A-share listed companies that entered 90 countries between 1997 and 2018 to analyze both the initial and subsequent entries of Chinese outward foreign direct investments (OFDIs) in major host countries. The findings indicate that an MNE's previous experience with a company from a particular country will increase the likelihood of an initial investment in that country. Previous alliance experience may accelerate the foreign investment process of EMNE and stimulate firms making a commitment to a position in a foreign network, regardless of cultural distance and stage of internationalization. Alliance before initial investment may increase the likelihood and speed of entering a host country as wholly owned subsidiaries and that network linkages not only significantly influence the internationalization process of small and medium-sized enterprises, as indicated by the IPM, but also that of large listed firms.

The Differences in the Selection of Outward FDI Locations between State- and Privately Owned Enterprises of China: Focusing on the Effects of Host Country Factors (중국 국유기업과 민간기업 간 해외직접투자 입지 차이 분석: 현지국 요인의 영향을 중심으로)

  • Ra, Wonchan;Wu, Mengqiu
    • Korea Trade Review
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    • v.44 no.6
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    • pp.345-361
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    • 2019
  • In recent years, Chinese firms have explosively increased outward foreign direct investment (oFDI). While state-owned enterprises (SOEs) are still dominant in Chinese oFDI, privately-owned enterprises (POEs) are also accelerating their internationalization. These two types of Chinese firms differ in their behavior regarding oFDI. The objective of this paper is to analyze the differences in the choice of oFDI locations between Chinese SOEs and POEs by considering host country factors. By integrating the literature on Chinese firms' oFDI and on FDI locations, we developed six hypotheses concerning how host country factors affect their choice of location. We tested our hypotheses by conducting multiple regression analysis with recent secondary data on 413 Chinese MNEs in 88 countries between 2005 and 2016. The results of the test show that in selecting oFDI locations, Chinese SOEs invest relatively more in countries with richer natural resources, more abundant strategic assets, less production efficiency, higher political risk, and lower institutional quality compared with Chinese POEs. It is our hope that the empirical results of this paper will contribute to research on Chinese oFDI.

Types and Structure of Chinese Companies Outward Foreign Direct Investment (중국기업의 해외직접투자 유형과 구조)

  • Heur, Heung-Ho
    • The Journal of the Korea Contents Association
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    • v.22 no.2
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    • pp.514-528
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    • 2022
  • This study attempted to understand the characteristics of foreign direct investment by Chinese companies from the perspective of Dunning's OLI paradigm. This development of OFDI by Chinese companies was influenced by the Chinese government's policy, internal factors of the Chinese economy, and the economic and institutional environment of the investment target country. The characteristic of Chinese companies' OFDI is that investment in developed countries is gradually increasing amid regional concentration in Asia. And the proportion of tertiary industries is high, In the meantime, the structure of the secondary industry is changing. In addition, Chinese companies are gradually expanding and showing characteristics by considering the economic and political factors of the investment target country in the selection of overseas investment areas, and then selecting areas with little cultural difference from China's system. This characteristic of OFDI by Chinese companies is basically evaluated to be in line with the OLI paradigm of Dunning. However, the difference is that Chinese companies' OFDI not only advances in overseas investment using the strengths of companies, but also advances in investment to compensate for their shortcomings.

Global Value Chains Perspective of Korea Foreign Direct Investment (OFDI) and Policy Direction (GVC(글로벌가치사슬) 관점에서 본 한국의 해외직접투자 현황과 정책방향)

  • Jung, Moo-Sup;Yang, Young-Soo;Kim, Dae-Young
    • Korea Trade Review
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    • v.41 no.4
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    • pp.245-267
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    • 2016
  • The purpose of this study is to investigate the current situation of foreign direct investment of Korea based on GVC (Global Value Chain) perspective and to presentthe policy direction. From GVC perspective which comprehensively describes the world's increasing FDI and imports/exports phenomenon since the 2000s, the level of internationalization of Korea is excessively concentrated in trade. Therefore, the expansion of foreign investment (OFDI, IFDI) is urgently needed. The results of regression analysis using data from 50 countries and the international comparison of major countries including Germany, Switzerland, Singapore, etc, showed that the level of foreign direct investment of Korea is 20 to 30 years behind compared to those major countries. Therefore, exploiting the benefits of trade and foreign direct investment at the same time is needed to increase the level of GDP per capita.

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