The effects of conventional and unconventional FDI on the host country: A case study of the Korean automobile industry
ISSN: 1229-828X
Article publication date: 11 June 2018
Issue publication date: 2 July 2018
Abstract
Purpose
The purpose of this paper is to analyze and compare the effects of conventional and unconventional FDI on the host country in a more comprehensive and systematic way.
Design/methodology/approach
Both the OLI paradigm and the imbalance theory are linked to the diamond model in order to compare the effects of conventional and unconventional FDI on the host country. This methodology is then applied to the real world as a case study, FDI toward the Korean automobile industry.
Findings
Conventional FDI is often said to be more beneficial to the host country than the unconventional type. However, the actual effect of unconventional FDI is shown to be more positive with better management and is often larger than perceived. Therefore, unconventional FDI emerges as important as conventional FDI for sustainable economic development.
Practical implications
In general, unconventional FDI has often been criticized severely because of misperceptions derived from the dominance of conventional FDI on theoretical aspects, incomprehensive perspectives toward assessing the effects of FDI, and negative political views. Therefore, rigorous and holistic case study analyses based on solid analytical tools are needed in order to better understand the effects of unconventional FDI and to draw up effective and proper FDI promotion policies.
Originality/value
This paper provides a way to better understand the effect of unconventional FDI on the host country comprehensively and systematically by expanding and deepening existing theories. Based on this, the effects of conventional and unconventional FDI on the host country are compared theoretically and empirically, particularly with the case of the Korean automobile industry.
Keywords
Acknowledgements
The authors would like to thank Sangwook Lee from Hyundai Motor Group for obtaining data and sharing very useful discussions for earlier drafts. An earlier version of this paper was presented at the 17th World Economic History Congress (WEHC), Kyoto, Japan (16th August 2015). This paper was further developed and updated.
Citation
Parc, J. and Jung, J.S. (2018), "The effects of conventional and unconventional FDI on the host country: A case study of the Korean automobile industry", Journal of Korea Trade, Vol. 22 No. 2, pp. 105-120. https://doi.org/10.1108/JKT-09-2017-0087
Publisher
:Emerald Publishing Limited
Copyright © 2018, Korea Trade and Research Association