Industry stucture, performance and foreign direct investment: The case of Korea. An empirical study of the impact of foreign direct investment on manufacturing performance in the Republic of Korea.

Abstract

The objective of this thesis is to investigate the influence and. impact of foreign direct investment inflow into the Republic of Korea. It is also an investigation of the development of the Korean economy. The research investigates the relationship between foreign direct investment and the development of the Korean economy by examining both the macro and micro aspects of the relationship between the two. This involves considering the performance of the Korean economy as a whole and then taking a more detailed approach by treating the analysis of the relationship at the level of individual industrial sectors. It also involves investigating the role played by the Korean government in the development of the economy and the control of foreign direct investment inflow. The analysis uses a two stage approach, first by taking an exploratory correlation analysis of the interaction between the inflow and a series of key variables, which allows a number of tentative conclusions to be drawn. By using these conclusions in conjunction with the literature survey we were able to analyse the nature and impact of foreign direct investment in Korea using regression analysis. The analysis revealed that except for isolated instances, the influence of the inflow of foreign direct investment at either the macro-or micro level is long-term. The positive effect of the inflow appears to be strongest on Gross National Product and Gross Domestic Product and on exports rather than imports. The results from the principal industrial sectors suggest that greatest impact was when the inflow was associated with larger firms. Furthermore the results suggest that the country of origin of the investment may well have an influence. In addition the research highlights the importance of the role played by the Korean government.