해외직접투자가 기업의 지식재산권 확보와 성과에 미치는 영향(The Effects of Outward Foreign Direct Investment on Firm’s Innovation Activities and Financial Performance: The case of Korea)

In general, negative discussions and impressions regarding outward FDI, such as capital outflows, job losses, leakage of trade secrets, and hollowingout of domestic industries, seem to dominate. The controversy, which focused on greenfield investments in the past, seems to be widely applied to recent mergers and acquisitions (M&As). Against this backdrop, the purposeof this report is twofold: first, to improve the understanding of how the increase in Korean firms’ FDI through M&As and related innovation activities in the U.S. market affects the performance of the investing Korean firms and their domestic affiliates; and second, to provide objective long-term policy directions on outward FDI and firms’ innovation activities based on the results found using firm-level data. The following results and findings in each chapter of this report are presented as follows. On the theoretical side, based on the theoretical model developed by Akcigit, Ates, and Impullitti (2018), Chapter 2 examines the mechanisms through which FDI can affect the incentives to innovate and the financial performance of investing firms. Market integration through M&As creates a scale effect and a competitive effect. The cost of innovation also plays a role in firms’ innovation incentives and financial performance. A spillover expected from knowledge sharing resulting from access to a new market is an additional channel. Regarding the scale effect, access to large, developed markets is one of the reasons why direct investment is a rational choice for a firm’s innovation. Large markets tend to have more intermediate resources to use and a larger pool of information to share. However, access to a new market through FDI can change the competitive structure that the investing companies face. Direct access to a foreign market creates higher expected profits if an investing firm’s innovation is successful. Still, if it is not, the firm may face stiffer competition or be forced out of the market. The degree of monopoly power is indeed the main factor determining the profits of successful innovations. However, the firm’s current profit only lasts until the next innovation occurs, and if there is no subsequentinnovation that is better than that the competitor’s, the company’s profit will decrease or it will be exited from the market. To survive, companies need to continuously invest and work on innovation. The spillover of technologies and the knowledge embedded in the R&D performed or in the patents filed as part of these efforts are another channel through which companies strive for better quality and innovation. (the rest omitted)