Equity Ownership Determination in Foreign Direct Investments of Developing Economies: The Case of Korean Outward FDIs

In this paper, we develop an international joint venture model and examine the equity ownership determination of Korean outward FDIs, one of the major developing economies (DEs), into both developed countries (DCs) and other DEs. We do this by explicitly considering the cost of technology leakage an...

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Bibliographic Details
Published in:Review of Pacific basin financial markets and policies 2012-03, Vol.15 (1), p.1
Main Authors: Bae, Sung C, Ju, Kyungwon, Kim, Kyoo H, Kwon, Taek Ho
Format: Article
Language:English
Subjects:
Competitive advantage
Economic development
Equity stake
Foreign investment
Host country
Joint ventures
Manufacturing
Studies
Online Access:Get full text
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Summary:In this paper, we develop an international joint venture model and examine the equity ownership determination of Korean outward FDIs, one of the major developing economies (DEs), into both developed countries (DCs) and other DEs. We do this by explicitly considering the cost of technology leakage and the potential profits from FDI projects. Our results show that the relation between equity ownership and technology level depends on both the host country and industry sector. Regarding the host country, this relation is positive for FDIs into DEs but negative for FDIs into DCs. Regarding industry, this relation is positive and insignificant for the manufacturing sector but negative and significant for the nonmanufacturing sector. Combined together, these results indicate that Korean firms benefit most from competitive advantages through their FDIs into the manufacturing sector of DEs. In contrast, such competitive advantages of Korean firms diminish in their FDIs into DCs regardless of the industry sector. [PUBLICATION ABSTRACT]
ISSN:0219-0915
1793-6705