IDEAS home Printed from https://ideas.repec.org/a/spr/manint/v62y2022i1d10.1007_s11575-022-00462-5.html
   My bibliography  Save this article

The Role of Outward FDI in Creating Korean Global Factories

Author

Listed:
  • Peter J. Buckley

    (Leeds University Business School)

  • Nigel Driffield

    (University of Warwick)

  • Jae-Yeon Kim

    (Portsmouth Business School)

Abstract

This study examines Korean foreign direct investment (FDI) in the context of the organization and development of local firms into global factories. Specifically, we explore the relationship between FDI decisions and the nature of Korea’s imported and exported goods. We argue that the global factory approach explains the mechanisms by which FDI can lead to technological upgrading. We employ a unique dataset that incorporates information on FDI motive from South Korea, as well as the unit value of traded goods within sectors. Our findings indicate that FDI location and motive vary by trade destinations and trade unit prices; something that has not received attention in existing literature.

Suggested Citation

  • Peter J. Buckley & Nigel Driffield & Jae-Yeon Kim, 2022. "The Role of Outward FDI in Creating Korean Global Factories," Management International Review, Springer, vol. 62(1), pages 27-52, February.
    • Handle: RePEc:spr:manint:v:62:y:2022:i:1:d:10.1007_s11575-022-00462-5
    DOI: 10.1007/s11575-022-00462-5
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s11575-022-00462-5
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s11575-022-00462-5?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Keith Head & Thierry Mayer, 2004. "Market Potential and the Location of Japanese Firms in the European Union," Post-Print hal-00267438, HAL.
    2. Caroline T Witte & Martijn J Burger & Elena I Ianchovichina & Enrico Pennings, 2017. "Dodging bullets: The heterogeneous effect of political violence on greenfield FDI," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 48(7), pages 862-892, September.
    3. Ponte, Stefano & Kelling, Ingrid & Jespersen, Karen Sau & Kruijssen, Froukje, 2014. "The Blue Revolution in Asia: Upgrading and Governance in Aquaculture Value Chains," World Development, Elsevier, vol. 64(C), pages 52-64.
    4. Peter J. Buckley, 2014. "The Multinational Enterprise and the Emergence of the Global Factory," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-137-40238-7.
    5. Alan M. Rugman & Alain Verbeke, 2005. "Extending the Theory of the Multinational Enterprise: Internalization and Strategic Management Perspectives," Chapters, in: Analysis of Multinational Strategic Management, chapter 7, pages 91-103, Edward Elgar Publishing.
    6. Buckley, Peter J. & Tian, Xiaowen, 2017. "Internalization theory and the performance of emerging-market multinational enterprises," International Business Review, Elsevier, vol. 26(5), pages 976-990.
    7. Coe, David T. & Helpman, Elhanan, 1995. "International R&D spillovers," European Economic Review, Elsevier, vol. 39(5), pages 859-887, May.
    8. Peter J. Buckley, 2011. "International Integration and Coordination in the Global Factory," Management International Review, Springer, vol. 51(2), pages 269-283, April.
    9. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    10. Peter J. Buckley, 2014. "International Integration and Coordination in the Global Factory," Palgrave Macmillan Books, in: The Multinational Enterprise and the Emergence of the Global Factory, chapter 1, pages 3-19, Palgrave Macmillan.
    11. Hiau Looi Kee & Heiwai Tang, 2016. "Domestic Value Added in Exports: Theory and Firm Evidence from China," American Economic Review, American Economic Association, vol. 106(6), pages 1402-1436, June.
    12. Cheng, Leonard K. & Kwan, Yum K., 2000. "What are the determinants of the location of foreign direct investment? The Chinese experience," Journal of International Economics, Elsevier, vol. 51(2), pages 379-400, August.
    13. Verbeke, Alain & Kano, Liena & Yuan, Wenlong, 2016. "Inside the regional multinationals: A new value chain perspective on subsidiary capabilities," International Business Review, Elsevier, vol. 25(3), pages 785-793.
    14. Peter J Buckley & Pervez N Ghauri, 2004. "Globalisation, economic geography and the strategy of multinational enterprises," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 35(3), pages 255-255, May.
    15. David Roodman, 2006. "How to Do xtabond2," North American Stata Users' Group Meetings 2006 8, Stata Users Group.
    16. Verbeke, Alain & Kano, Liena, 2015. "The New Internalization Theory and Multinational Enterprises from Emerging Economies: A Business History Perspective," Business History Review, Cambridge University Press, vol. 89(3), pages 415-445, October.
    17. Belderbos, Rene & Carree, Martin, 2002. "The Location of Japanese Investments in China: Agglomeration Effects, Keiretsu, and Firm Heterogeneity," Journal of the Japanese and International Economies, Elsevier, vol. 16(2), pages 194-211, June.
    18. Ram Mudambi, 2008. "Location, control and innovation in knowledge-intensive industries," Journal of Economic Geography, Oxford University Press, vol. 8(5), pages 699-725, September.
    19. Liang Chen & Noman Shaheer & Jingtao Yi & Sali Li, 2019. "The international penetration of ibusiness firms: Network effects, liabilities of outsidership and country clout," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 50(2), pages 172-192, March.
    20. Enderwick, Peter & Buckley, Peter J., 2019. "Beyond supply and assembly relations: Collaborative innovation in global factory systems," Journal of Business Research, Elsevier, vol. 103(C), pages 547-556.
    21. John Dunning, 1981. "Explaining the international direct investment position of countries: Towards a dynamic or developmental approach," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 117(1), pages 30-64, March.
    22. Kang, Sung Jin & Lee, Hong Shik, 2007. "The determinants of location choice of South Korean FDI in China," Japan and the World Economy, Elsevier, vol. 19(4), pages 441-460, December.
    23. Azmeh, Shamel & Nadvi, Khalid, 2014. "Asian firms and the restructuring of global value chains," LSE Research Online Documents on Economics 56666, London School of Economics and Political Science, LSE Library.
    24. repec:hal:spmain:info:hdl:2441/10192 is not listed on IDEAS
    25. Azmeh, Shamel & Nadvi, Khalid, 2014. "Asian firms and the restructuring of global value chains," International Business Review, Elsevier, vol. 23(4), pages 708-717.
    26. Schmeisser, Bjoern, 2013. "A Systematic Review of Literature on Offshoring of Value Chain Activities," Journal of International Management, Elsevier, vol. 19(4), pages 390-406.
    27. Peter J Buckley & Pervez N Ghauri, 2004. "Globalisation, economic geography and the strategy of multinational enterprises," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 35(2), pages 81-98, March.
    28. Keith Head & Thierry Mayer, 2004. "Market Potential and the Location of Japanese Investment in the European Union," The Review of Economics and Statistics, MIT Press, vol. 86(4), pages 959-972, November.
    29. Buckley, Peter J., 2009. "The impact of the global factory on economic development," Journal of World Business, Elsevier, vol. 44(2), pages 131-143, April.
    30. John Dunning & Chang-Su Kim & Jyh-Der Lin, 2001. "Incorporating Trade into the Investment Development Path: A Case Study of Korea and Taiwan," Oxford Development Studies, Taylor & Francis Journals, vol. 29(2), pages 145-154.
    31. Raymond Vernon, 1966. "International Investment and International Trade in the Product Cycle," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 80(2), pages 190-207.
    32. Henry, Michael & Kneller, Richard & Milner, Chris, 2009. "Trade, technology transfer and national efficiency in developing countries," European Economic Review, Elsevier, vol. 53(2), pages 237-254, February.
    33. Farok J. Contractor & Vikas Kumar & Sumit K. Kundu & Torben Pedersen, 2010. "Reconceptualizing the Firm in a World of Outsourcing and Offshoring: The Organizational and Geographical Relocation of High‐Value Company Functions," Journal of Management Studies, Wiley Blackwell, vol. 47(8), pages 1417-1433, December.
    34. Robert Grosse & Len J Trevino, 1996. "Foreign Direct Investment in the United States: An Analysis by Country of Origin," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 27(1), pages 139-155, March.
    35. Buckley, Peter J., 2009. "Internalisation thinking: From the multinational enterprise to the global factory," International Business Review, Elsevier, vol. 18(3), pages 224-235, June.
    36. Driffield, Nigel & Jones, Chris & Kim, Jae-Yeon & Temouri, Yama, 2021. "FDI motives and the use of tax havens: Evidence from South Korea," Journal of Business Research, Elsevier, vol. 135(C), pages 644-662.
    37. Nigel Driffield & James H Love, 2007. "Linking FDI motivation and host economy productivity effects: conceptual and empirical analysis," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 38(3), pages 460-473, May.
    38. Sumon Kumar Bhaumik & Nigel Driffield & Sarmistha Pal, 2010. "Does ownership structure of emerging-market firms affect their outward FDI? The case of the Indian automotive and pharmaceutical sectors," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 41(3), pages 437-450, April.
    39. Bhaumik, Sumon Kumar & Driffield, Nigel & Zhou, Ying, 2016. "Country specific advantage, firm specific advantage and multinationality – Sources of competitive advantage in emerging markets: Evidence from the electronics industry in China," International Business Review, Elsevier, vol. 25(1), pages 165-176.
    40. Liena Kano, 2018. "Global value chain governance: A relational perspective," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 49(6), pages 684-705, August.
    41. repec:hal:wpspec:info:hdl:2441/10192 is not listed on IDEAS
    42. repec:bla:jomstd:v:47:y:2010:i:s2:p:1417-1433 is not listed on IDEAS
    43. Nigel Driffield & Max Munday, 2000. "Industrial Performance, Agglomeration, and Foreign Manufacturing Investment in the UK," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 31(1), pages 21-37, March.
    44. Haraguchi, Nobuya & Martorano, Bruno & Sanfilippo, Marco, 2019. "What factors drive successful industrialization? Evidence and implications for developing countries," Structural Change and Economic Dynamics, Elsevier, vol. 49(C), pages 266-276.
    45. Jae-Yeon Kim & Nigel Driffield & Yama Temouri, 2016. "The changing nature of South Korean FDI to China," International Journal of Multinational Corporation Strategy, Inderscience Enterprises Ltd, vol. 1(3/4), pages 269-287.
    46. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    47. Gary Gereffi, 1989. "Development Strategies and the Global Factory," The ANNALS of the American Academy of Political and Social Science, , vol. 505(1), pages 92-104, September.
    48. Peter J. Buckley & Roger Strange, 2011. "The Governance of the Multinational Enterprise: Insights from Internalization Theory," Journal of Management Studies, Wiley Blackwell, vol. 48(2), pages 460-470, March.
    49. Windmeijer, Frank, 2005. "A finite sample correction for the variance of linear efficient two-step GMM estimators," Journal of Econometrics, Elsevier, vol. 126(1), pages 25-51, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Leena Ajit Kaushal, 2022. "Institutional and economic determinants of Indian OFDI," Cogent Economics & Finance, Taylor & Francis Journals, vol. 10(1), pages 2147648-214, December.
    2. Yunok Cho & Nigel Driffield & Sourindra Banerjee & Byung Il Park, 2023. "Returns to Internationalization: Business Group-Affiliated Firms vs Standalone Firms," Management International Review, Springer, vol. 63(4), pages 603-639, August.
    3. Yao Li & Yugang He, 2024. "Unraveling Korea’s Energy Challenge: The Consequences of Carbon Dioxide Emissions and Energy Use on Economic Sustainability," Sustainability, MDPI, vol. 16(5), pages 1-29, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Roger Strange & John Humphrey, 2019. "What lies between market and hierarchy? Insights from internalization theory and global value chain theory," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 50(8), pages 1401-1413, October.
    2. Kurt, Yusuf & Kurt, Mustafa, 2020. "Social network analysis in international business research: An assessment of the current state of play and future research directions," International Business Review, Elsevier, vol. 29(2).
    3. McWilliam, Sarah E. & Kim, Jung Kwan & Mudambi, Ram & Nielsen, Bo Bernhard, 2020. "Global value chain governance: Intersections with international business," Journal of World Business, Elsevier, vol. 55(4).
    4. Liena Kano & Eric W. K. Tsang & Henry Wai-chung Yeung, 2020. "Global value chains: A review of the multi-disciplinary literature," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 51(4), pages 577-622, June.
    5. Buckley, Peter J. & Craig, Thomas D. & Mudambi, Ram, 2019. "Time to learn? Assignment duration in global value chain organization," Journal of Business Research, Elsevier, vol. 103(C), pages 508-518.
    6. Cuervo-Cazurra, Alvaro & Pananond, Pavida, 2023. "The rise of emerging market lead firms in global value chains," Journal of Business Research, Elsevier, vol. 154(C).
    7. José-Antonio Monteiro & Madina Kukenova, 2008. "Does Lax Environmental Regulation Attract FDI When Accounting For "Third-Country" Effects?," IRENE Working Papers 08-01, IRENE Institute of Economic Research.
    8. Peter J. Buckley & Roger Strange & Marcel P. Timmer & Gaaitzen J. de Vries, 2020. "Catching-up in the global factory: Analysis and policy implications," Journal of International Business Policy, Palgrave Macmillan, vol. 3(2), pages 79-106, June.
    9. Buckley, Peter J. & Enderwick, Peter & Hsieh, Linda & Shenkar, Oded, 2024. "International business theory and the criminal multinational enterprise," Journal of World Business, Elsevier, vol. 59(5).
    10. Liena Kano, 2018. "Global value chain governance: A relational perspective," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 49(6), pages 684-705, August.
    11. Francesco Debellis & Emanuela Rondi & Peter J. Buckley & Alfredo Massis, 2024. "Family firms and the governance of global value chains," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 55(8), pages 962-975, October.
    12. Buckley, Peter J., 2016. "Alan Rugman and internalisation theory," International Business Review, Elsevier, vol. 25(3), pages 753-757.
    13. Cantner, Uwe & Günther, Jutta & Hassan, Sohaib Shahzad & Jindra, Björn, 2013. "Outward FDI from the Central and Eastern European Transition Economies – A Discrete Choice Analysis of Location Choice within the European Union," MPRA Paper 51817, University Library of Munich, Germany, revised 04 Jun 2013.
    14. Jensen, Peter D. Ørberg, 2012. "A passage to India: A dual case study of activities, processes and resources in offshore outsourcing of advanced services," Journal of World Business, Elsevier, vol. 47(2), pages 311-326.
    15. Eriksson, Taina & Nummela, Niina & Saarenketo, Sami, 2014. "Dynamic capability in a small global factory," International Business Review, Elsevier, vol. 23(1), pages 169-180.
    16. Julien Gooris & Carine Peeters, 2014. "Fragmenting global business processes: A protection for proprietary information," Working Papers 2014-12, CEPII research center.
    17. Celo, Sokol & Nebus, James & Wang, I. Kim, 2018. "The Role of Internal and External Complexity in Global Factory Performance: An NKC Application," Journal of International Management, Elsevier, vol. 24(1), pages 65-83.
    18. Barbieri, Paolo & Boffelli, Albachiara & Elia, Stefano & Fratocchi, Luciano & Kalchschmidt, Matteo, 2022. "How does Industry 4.0 affect international exposure? The interplay between firm innovation and home-country policies in post-offshoring relocation decisions," International Business Review, Elsevier, vol. 31(4).
    19. Yin, Tong & De Propris, Lisa & Jabbour, Liza, 2021. "Assessing the effects of policies on China’s outward foreign direct investment," International Business Review, Elsevier, vol. 30(5).
    20. Narula, Rajneesh & Verbeke, Alain, 2015. "Making internalization theory good for practice: The essence of Alan Rugman's contributions to international business," Journal of World Business, Elsevier, vol. 50(4), pages 612-622.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:manint:v:62:y:2022:i:1:d:10.1007_s11575-022-00462-5. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.