The Korean Journal of Economic Studies
Empirical Analysis of the Relationship between Inward and Outward Foreign Direct Investment of Manu
Nyeong Seon Son (Sogang University) and Jung Hur (Sogang University)Year 2017Vol. 65No. 2
This paper conducts empirical analysis of a pattern of inward and outwardforeign direct investment(FDI) of manufacturing firms in the perspective of theinternalization theory. Using data on the Survey of Business Activities providedby the Statistics Korea, we use bivariate probit model to investigate correlationbetween foreign ownership and foreign affiliates. Our results show that thereis substitutability between the two choices. The results suggest that thepurpose of investment of foreign ownership to Korean manufacturing industrymight not be to expand value chain, but to integrate specialized productionstage. Otherwise, domestic firms without foreign ownership want to makeforeign affiliate in order to join global value chain. The contribution of thispaper is that we explain the pattern of inward and outward FDI in Koreanmanufacturing industry through the perspective of global value chain by usingfirm-level data.