A comparative Study on Outward FDI: Korea, Japan, China

Abstract

Until now trade used to be the focus of the internationalization and the expansion of the market as well as business into other countries but there was a shift. The assumption of which trade takes place is when there is perfect competition and the resource endowment of capital and labor are the only factors that affect production, while all the other factors are immobile. As the true market is imperfect in real life and with the trend of globalization, the importance of Foreign Direct Investment (FDI) has increased. There being limited amounts of resources in a country, many firms are seek opportunities abroad to expand their business. Thus, this paper will deal upon the matter of the determinants of the trend of Outward FDI. This study mainly focuses on the patterns of Outward Foreign Direct Investment (OFDI) in the East Asian region, focusing on Korea, Japan, and China. The paper is a comparative study on how the three countries differ and have similarities in their decisions when conducting FDI. The paper chose to deal with the 3 most developedcountries in the East Asian region because they have similar cultures and historical backgrounds. It is a well-known fact that the Korean Economy follows the Japanese economy with a gap of 10 years. To add on, China, despite its distinct political and territorial characteristics seems to be catching up showing similar patterns in their economic growth status with the other two countries. This paper has used the STATA program to run several different regression models in order to differentiate the patterns in which the three countries conduct OFDI in a host country. The data will be collected based on the host countries of which FDI was performed. The determinants that were used as variables are the distance, GDP, population, GDP per capita, political risk (corruption level), natural resource endowment, and trade openness. The results from the regression have shown that all three countries are positively correlated with GDP, GDP per capita, natural resource endowment. While it is negatively correlated with population and has shown insignificant results for Political risk. Thus, through this paper, the author would like to provide predictions of the Korean and Chinese economy and show that the three countries have similar investment patterns

세계화가 진행됨에 따라 국제경제에서 무역에 더불어 해외투자의 중요성이 커지고 있다. 아시아에 위치하고 유사한 경제성장 모습을 보인 세 국가 한국, 일본, 중국이 해외에 투자를 할 때 어떤 요인들에 영향을 받는지 알아보았다. STATA 통계프로그램을 이용해 11년간의 데이터를 이용해 패널 회귀분석을 실시했다. 독립변수로 GDP, 1인당 GDP, 인구, 무역량, 자연자원, 정치부패지수를 이용했다. 해외투자 대상국의 어떤 특징들이 한중일로 하여금 투자를 더 많이 혹은 적게 하는지 검증했다. 세 국가는 위의 요인들에 있어 유사한 상관관계를 보였다.