FDI Motivation of Hyundai Motor Company in the U.S. Automotive Market

Abstract

Recent conventional literature on FDI, including the theories on international location of R&D activities and networking treat the foreign expansion as the outcome of competitive (ownership) advantage. However, they have not paid much attention to the investments based on firm-specific disadvantage by companies originating from developing or relatively less developed countries. This study, therefore, analyzes the motivations of the investments rising from the relative competitive disadvantage, with a specific focus on companys R&D globalization and their R&D alliance network rooted in an advanced region as a demonstration of upward trend of FDI flow. In doing so, by utilizing Dunnings eclectic (OLI) paradigm (Dunning, 1995, 2000, 2009), this study incorporates Moon and Roehls (2001) imbalance theory in order to describe determinants of those upward FDI flows and its compatibility with chosen location. Research is based on empirical observations of increasing importance of the new global automobile players from South Korea. Hence, this paper uses the case study of Hyundai Motor Company (HMC) to trace companys main incentives for its foreign relocation of R&D activities and its R&D networking in the United States. Research comes with the conclusion that while cost cutting and R&D asset-exploiting is considered by the existing traditional theories as an initial reason for R&D globalization and networking

the case of HMC shows that the initial motivation for its FDI strategy was R&D resource- and asset-seeking and augmenting in order to overcome original technological ownership disadvantage. Even nowadays, HMCs R&D investments in the U.S. market have been driven mainly by the need to seek and access locally-bound specific resources and assets embedded in its R&D alliance networks which are nested in the region

and to benefit from the externalities and spillovers that the potential of the U.S. economy offers.