Forum for Science, Industry and Business

Sponsored by:     3M 
Search our Site:

 

Foreign direct investment in a changing political environment: Finnish investment decisions in South Korea

20.12.2005


The dissertation in the field of economic geography by Kristiina Korhonen, Lic.Sc. (Econ.), ”Foreign direct investment in a changing political environment: Finnish investment decisions in South Korea” will be publicly examined at the Helsinki School of Economics on Monday, December 19th, 2005. The public examination starts at 12:00 in the Stora Enso Hall of the Chydenia Building. The opponent is Professor Sam-Ock Park, PhD (Seoul National University), and the custos is Professor Jarmo Eronen, PhD (Helsinki School of Economics).



This dissertation contributes to an understanding of foreign direct investment (FDI) in a changing political environment. Although the theoretical framework for the study is the geography of enterprise approach, it has been augmented with theories from the fields of strategic management, international business, and political economy. The research problem of the study asks how transnational corporations (TNCs) perceive and react to the changes in the political environment of the host country.

The literature has basically studied the spatial aspects of FDI separately from the growth and performance of firms, while the present study aims to combine them. Korhonen has modified the strategy-performance model to identify the relevant factors with an impact on the investment decisions and performance of the TNCs, including the location conditions in the host country. The results show that firms interpret the location conditions into a special set of location factors, which are crucial from their strategy perspective.


The study asks whether the political environment of the firm in the host country has a special role among the other parts of the firm’s environment (natural, economic, demographic, cultural, and technological), because of the host government’s capacity to intervene in FDI. Korhonen argues that firms may not need to bargain alone with the host government, but may lobby for help from their home government. Therefore, the present study adds the concept of ‘authority services’ to the list of a TNC’s bargaining techniques.

The model was empirically applied to the case of Finnish investment in South Korea (hereafter Korea). The Korean government liberalised its investment policy in 1998. Thus, the present study compares Finnish investment in Korea during the restricted (1984-1997) and liberal (1998-2002) regimes. The empirical results show that the change in the political environment of Korea had a clear impact on Finnish investment in Korea. However, the change cannot be totally separated from the other simultaneous changes, the most influential which was the technological advancement of the Korean society. The results indicate that repeat investments had been undertaken regardless of the investment policy liberalisation, but that the acquisitions had not taken place without this change. In a changing political environment, the authority services provided by the Finnish government were important to Finnish investors.

Korhonen suggests that the impact of the environment change on the firm’s investment decision-making can be successfully studied with the modified strategy-performance model, regardless of the host country. However, any further evidence on the particular role of the political environment over the other parts of the firm’s general macro-environment was not found. Each firm emphasised different variables of the external environment, reflecting the fact that firms perceive the same host country differently according to their strategies. This justifies the use of concepts of location conditions and location factors.

Eeva Lehtinen | alfa
Further information:
http://www.hse.fi
http://helecon3.hkkk.fi/diss/?lang=eng

More articles from Business and Finance:

nachricht Mathematical confirmation: Rewiring financial networks reduces systemic risk
22.06.2017 | International Institute for Applied Systems Analysis (IIASA)

nachricht Frugal Innovations: when less is more
19.04.2017 | Fraunhofer-Institut für Arbeitswirtschaft und Organisation IAO

All articles from Business and Finance >>>

The most recent press releases about innovation >>>

Die letzten 5 Focus-News des innovations-reports im Überblick:

Im Focus: Climate satellite: Tracking methane with robust laser technology

Heatwaves in the Arctic, longer periods of vegetation in Europe, severe floods in West Africa – starting in 2021, scientists want to explore the emissions of the greenhouse gas methane with the German-French satellite MERLIN. This is made possible by a new robust laser system of the Fraunhofer Institute for Laser Technology ILT in Aachen, which achieves unprecedented measurement accuracy.

Methane is primarily the result of the decomposition of organic matter. The gas has a 25 times greater warming potential than carbon dioxide, but is not as...

Im Focus: How protons move through a fuel cell

Hydrogen is regarded as the energy source of the future: It is produced with solar power and can be used to generate heat and electricity in fuel cells. Empa researchers have now succeeded in decoding the movement of hydrogen ions in crystals – a key step towards more efficient energy conversion in the hydrogen industry of tomorrow.

As charge carriers, electrons and ions play the leading role in electrochemical energy storage devices and converters such as batteries and fuel cells. Proton...

Im Focus: A unique data centre for cosmological simulations

Scientists from the Excellence Cluster Universe at the Ludwig-Maximilians-Universität Munich have establised "Cosmowebportal", a unique data centre for cosmological simulations located at the Leibniz Supercomputing Centre (LRZ) of the Bavarian Academy of Sciences. The complete results of a series of large hydrodynamical cosmological simulations are available, with data volumes typically exceeding several hundred terabytes. Scientists worldwide can interactively explore these complex simulations via a web interface and directly access the results.

With current telescopes, scientists can observe our Universe’s galaxies and galaxy clusters and their distribution along an invisible cosmic web. From the...

Im Focus: Scientists develop molecular thermometer for contactless measurement using infrared light

Temperature measurements possible even on the smallest scale / Molecular ruby for use in material sciences, biology, and medicine

Chemists at Johannes Gutenberg University Mainz (JGU) in cooperation with researchers of the German Federal Institute for Materials Research and Testing (BAM)...

Im Focus: Optoelectronic Inline Measurement – Accurate to the Nanometer

Germany counts high-precision manufacturing processes among its advantages as a location. It’s not just the aerospace and automotive industries that require almost waste-free, high-precision manufacturing to provide an efficient way of testing the shape and orientation tolerances of products. Since current inline measurement technology not yet provides the required accuracy, the Fraunhofer Institute for Laser Technology ILT is collaborating with four renowned industry partners in the INSPIRE project to develop inline sensors with a new accuracy class. Funded by the German Federal Ministry of Education and Research (BMBF), the project is scheduled to run until the end of 2019.

New Manufacturing Technologies for New Products

All Focus news of the innovation-report >>>

Anzeige

Anzeige

Event News

Plants are networkers

19.06.2017 | Event News

Digital Survival Training for Executives

13.06.2017 | Event News

Global Learning Council Summit 2017

13.06.2017 | Event News

 
Latest News

A new technique isolates neuronal activity during memory consolidation

22.06.2017 | Life Sciences

Plant inspiration could lead to flexible electronics

22.06.2017 | Materials Sciences

A rhodium-based catalyst for making organosilicon using less precious metal

22.06.2017 | Materials Sciences

VideoLinks
B2B-VideoLinks
More VideoLinks >>>