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Working Paper
Effects of Outward Foreign Direct Investment on Home Country Performance : Evidence from Korea

July 01, 1998

  • Author Seungjin Kim
  • Series No. Working Paper 9804
  • Language English
PDF
Working Paper
Effects of Outward Foreign Direct Investment on Home Country Performance : Evidence from Korea

July 01, 1998

  • Author Seungjin Kim
  • Series No. 9804
  • Language English
PDF
    Ⅰ. Introduction

    Ⅱ. Korean Outward Foreign Direct Investment; Trends, Structures and Motives

    Ⅲ. Effects of Korean OFDI on the Home Country Performance

    Ⅳ. Characteristics of Korean OFDI Supporting Home Country Effects

    Ⅴ. Summary and Conclusion
We could not find any evidence that outward foreign direct
investment of Korean multinational firms had a detrimental effect
on home country performance. Even though Korean multinational
firms depend less on foreign fund developed country firms,
overseas investment due to the small amount of OFDI relative to
domestic investment and the increased demand for domestic
investment through increased exports. Moreover, they finance an
increasingly large part of overseas investment from abroad. The
OFDI of Korean multinational firms was also discovered to have
a positive effect on exports. High shares of developing countries
and close association of the parents to foreign subsidiaries.
Domestic employment also do not seem to have been affected by
OFDI for similar reasons.

As pointed out in previous sections, the lack of evidence of
OFDI having harmful effects on home country performance can
be attributed to the fact that Korean OFDI has been at the
infant stage, where OFDI is not big enough to significantly
affect the domestic economy, and strategies associated with
OFDI are not complex enough to substitute for exports on the
net balance. The question coming out from this context will
naturally be "Can this continue to hold as Korean OFDI
increases and its strategies become more complex?". The answer
depends on how large a portion of OFDI will be involved in
such complex strategies where foreign subsidiaries increasingly
strengthen their independent position and play a stronger role as
the export base within the firm. A few business conglomerates
have already started complex strategies on a regional scope with
which both local sourcing and foreign subsidiaries` exports have
increased. It is not clear at this stage how far and fast the
strategies will go and how many firms will be able to pursue
the strategies.
 
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