Why do Korean firms invest in the EU? Evidence from FDI in the peripheral regions.

Abstract

This thesis examines the question of why the Korean electronics firms invest in the EU. It applies conventional OLI (Ownership-Location-Internalisation) paradigm of Dunning to explain the motivations of Korean investment in the EU. The main questions in this thesis are: What are the nature of competitive Ownership (O) advantages of Korean firms and Location (L) advantages of the EU. And how do both O and L advantages affect Korean firms' decision to invest. This thesis raises questions about the 'reverse investment theory' and refutes the basic logic of this theory (e.g., no clear O advantages of Korean firms, high labour costs of the EU, and advanced technology access as the main investment motivation). It mainly argues that some 'cost saving factors' (such as low labour costs, various types of grants and ability to source low-cost components from Korean suppliers) in the EU have been major determinants for Korean firms in the EU. In other words, low production cost is one of the most important location advantages that needs to be provided in order for Korean consumer electronics Chaebols in the EU to keep their competitive ownership advantages. Therefore, EU peripheral regions have satisfied the requirements for Korean electronics investors by offering relatively low labour cost and various investment subsidies, etc. The thesis demonstrates these arguments through the various primary data analysis and case-studies of Korean firms in the EU. It emphasizes the particular characteristics of Korean consumer electronics chaebols' investment in EU peripheral regions which are eligible for EU Structural Funds support (including special assistance through the structural funds to candidate countries)