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Does Political Instability Matter? U.S. Foreign Direct Investment(FDI) Policy and Political Instability in Korea

  • Korean Social Science Journal
  • Abbr : KSSJ
  • 2004, 31(1), pp.137-166
  • Publisher : Korean Social Science Research Council
  • Research Area : Social Science > Social Science in general

Jiho Jang 1 Seungkwon You 2

1건국대학교
2미조리 주립대학교

Candidate

ABSTRACT

This study shows systematic and empirical findings of the determinants of foreign direct investment in case of Korea, which has experienced various political, social, and economic phenomena. This study especially investigates the determinants of U.S. foreign direct investment flows in Korea before the country was democratized. Six variables of political instability: They inclide riots (protest demonstration); labor strikes; external threat; data from domestic violence; assassination; and coup d’etat. They are categorized with regard to the data from the the Far Eastern Economic Review weekly magazine(1977 to 1991). This study finds that there is no significant relationship between political instability and FDI flows in Korea, unless the political instability is severe enough to affect the FDI policy and economic conditions, which was the case of 1980. Although investors normally say that political instability is important to their investment decisions, their actions do not confirm this. In making their decision, we found economic conditions and economic policy matters more in the case of Korea.

Citation status

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