The Korean Manufacturing Multinationals
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International BusinessConsultant KEEYOUNGKIM**
YonseiUniversity Abstract. As an extension of the export-led growth of national economy overseas, direct investment by Korean multinationalshas been rapidly increasing. This article explores the development of the overseas manufacturing direct investment by Korean firms and the relationship between parent firms and overseas affiliates. Three main issues are discussed: the ownership-specific assets, location-specific factors, and government policies are the importantsets of variables that help to explain the internationalizationof the Koreanfirms in the manufacturingsector, the nature of technology transfer by Koreanmultinationalsto their subsidiaries, and the benefits as a result of its overseas investment to Korea.The data for this study were gathered through structured interviews with the parent companies of 18 out of 21 manufacturingoverseas subsidiaries and joint ventures formed by Koreanfirms.
* The Republic of Korea (henceforth called Korea) is no longer only a recipient of INTRODUCTION foreign direct investment (FDI). It is also emerging, slowly but steadily, as a source. The country now occupies a prominent place among a small group of ThirdWorldnations (Argentina, Brazil, Hong Kong, India, Mexico, Singapore, and Taiwan) whose firms have been establishing foreign direct investment, thereby earning the label of "multinational."1The total number of overseas joint ventures and subsidiaries established by Korean multinationals was 298 by the middle of 1980, and their total volume of overseas investment was $246 million (U.S.).2 Korean multinationals have invested in trading, warehousing, transportation, mining, forestry, and construction. Manufacturingaccounts for only 12 percent of the overseas projects and of the total volume of FDI by Korean multinationals. The authorized Korean FDI in manufacturingwas $31,266,000 by June 1980.3 This volume of investment is not a large sum considering the size of overseas investments by firms from industrialized nations, but is also not an insignificant amount in the context of the size, resources, and state of economic development of Korea. The Korean government has authorized 24 overseas manufacturing investments in a wide range of industries including garment, cement, electric cables, motors and diesel engines, paper, plywood, artificial chemicals, and shoes. Three of the 24 have been abandoned for various reasons. The details of the existing projects (at the time of interview)are given in Table 1. The overwhelming majorityof these projects are located in developing countries, particularlyAsia and the Middle East. The main purpose of this paper is to discuss overseas manufacturing direct *Krishna Kumarreceivedhis M.A.and Ph.D.fromMichigan State University. He has heldmany academicandadministrative His positionsand has publishedextensivelyin professional journals. mostrecentbooksincludeEthicsandPoliticsof International Collaborative Research(co-author), Multinationals fromDevelopingCountries(co-editor), Transnational TheirIm
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