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An Analysis on the Local Industrial Linkages of Foreign Direct Investment(FDI) Companies in Korea

Misook Cha 1

1국토연구원

Accredited

ABSTRACT

This article is aimed to analyze the local industrial linkage and localization of foreign direct investment companies in Korea. To accomplish this purpose, it analyzes the local industrial linkage, the employment effect and networking between FDI companies and regional social institutions, with an interview and questionnaire survey. The findings of this analysis are as follows. First, FDI companies are supplied materials less than their regions(15.2%) than from abroad(33.6%). Second, comparing with their purchase of materials within the regions, FDI companies are selling relatively much more products within the regions(42.4%). Theses patterns of local purchase and sales are closely connected with FDI companies' tendency to increase investment for the purpose of securing find a market. Third, all the FDI companies, which are located both in the capital and other regions, tend to work with institutions placed in the capital region in reference to the business service such as legal, accounting and tax matters. Fourth, the extent of technological transfer is limited. Fifth, the employment effect of the FDI companies is higher than that of other domestic companies in the manufacturing sector and regional employment effect is also high. An average of employment of FDI companies is 117 persons and the employment rate grows 4.6% than initial investment year. In addition, two-thirds of the surveyed FDI companies have cooperated with other domestic(subcontract) firms and one-third have had alliances with domestic firms. Interchanges between FDI companies and regional social institutions are few and are limited to mutual friendship. In Conclusion, the FDI companies in Korea can be classified to a "dependency model" in aspect of local industrial linkages and localization.

Citation status

* References for papers published after 2022 are currently being built.