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Globalization and Economic Development

Globalization and Economic Development

Essays in Honour of J. George Waardenburg

Edited by Servaas Storm and C. W.M. Naastepad

Globalization is widely regarded as a means not only of ensuring efficiency and growth, but also of achieving equity and development for those countries operating in the global economy. The book argues that this perception of globalization as the road to development has lost its lustre. The experience of the 1990s belied expectation of the gains, such as faster growth and reduced poverty, which could be achieved through closer integration in the world economy.

Chapter 11: Firm-level determinants of outward FDI from the Korean and Taiwanese electronics industry: An econometric analysis

Roger van Hoesel

Subjects: development studies, development economics, economics and finance, development economics, post-keynesian economics


Roger van Hoesel 1. INTRODUCTION For a long time the promotion of manufactured exports has been regarded as the most important source of economic growth of South Korea and Taiwan. At present, however, their cross-border business activities are no longer confined to exports. Since the end of the 1970s, Korean and Taiwanese companies have also started to invest abroad. Although this relatively new phenomenon has already been analysed to some extent at the more aggregate level (compare van Hoesel, 1996; Lee, 1994), much less is known about the firm-level determinants of outward investment. The primary goal of this chapter is therefore to investigate which firm-level factors determine whether a Korean or Taiwanese firm would rather invest abroad than export. But, as Chen (1992) noted, most of the indicators that are commonly tested in studies on the firm-level determinants of outward investment are typically ascribed to Multinational Enterprises (MNEs) from Early Industrialized Economies (EIEs). It therefore follows that a second question (almost automatically) has to be raised, namely whether the determinants that are derived from conventional MNE theory also apply in the case of MNEs from Late Industrialized Economies (LIEs). In other words, are the characteristics of Korean and Taiwanese MNEs similar to those of MNEs from EIEs?1 The numerous empirical studies carried out to test firm-level determinants of outward investment are in most cases based on samples of American, European or, especially in more recent years, Japanese companies.2 In view of the fact that most Foreign Direct Investment...

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