Journal of Korea Trade

한국무역학회 (Korea Trade Research Association)
권호 표지
DOI QR코드

DOI QR Code

The Relationship on Risk Type, Risk Management and Business Performance - Evidence from Korean FDIs in China

  • Yin, Heng-Bin (Department of International Trade, Wenzhou Business College) ;
  • Kim, Bo-Hyun (Department of International Trade, Sung Kyun Kwan University) ;
  • Jung, Hong-Joo (Business School, Sung Kyun Kwan University)
  • 투고 : 2019.06.30
  • 심사 : 2019.08.14
  • 발행 : 2019.08.31
PDF 다운로드
⟨ 이전 논문 다음 논문 ⟩

초록

Purpose - As the well-known Structure-Conduct-Performance paradigm implies, risk structure of a corporation may affect its risk management activity and the activity may in turn determine its performance. Depending on its goal, Foreign Direct Investment (FDI) can shape its risk structure, risk management and its performance. Under this assumption, we investigate the relationship between the goals of FDI and risk management for the first time in academics. Design/methodology - This empirical research uses a survey of 279 current Korean enterprises' FDIs in China with the recently developed business risk quadrant model. Companies are classified into either a market- or an efficiency-seeking group, to identify how each group perceives and manages risks, and values the performance of risk management. Also, we apply integrated risk management method that multinational corporations have introduced in China, then verify the mediating effect between risk factors and performance. Findings - Our research shows the FDIs can expose themselves to differing risk structure although risk management activities simply represent the level of empowerment given to local management by headquarter due to limit of sample size despite diversity of risk and risk management tools. To sum, market seekers are found to have more strategic risk (revenue related risk) than efficiency seekers with financial risk (cost related risk). The market seekers can manage their risk by empowering their local organisation while the efficiency does the opposite ways. The risk management appears to be successful in general. Originality/value - Previous studies on small and medium enterprises' FDIs to China have concentrated on the analysis of entry determinants, withdrawal factors and individual risk management. Meanwhile, this research establishes enterprise-wide risk factors faced by the companies that advance into China, according to the method of the classification by ERM and verifies if they could synthetically improve performance through risk corresponding measures.

키워드

참고문헌

  1. Ai, J., P. L. Brockett, W. W. Cooper and L. L. Golden (2012), "Enterprise Risk Management through Strategic Allocation of Capital", The Journal of Risk Management and Insurance, 79(1), 29-55. https://doi.org/10.1111/j.1539-6975.2010.01403.x
  2. Boateng, A., X. P. Hua, S. Nisar and J. J. Wu (2015), "Examining the Determinants of Inward FDI: Evidence from Norway", Economic Modelling, 47(6), 118-127. https://doi.org/10.1016/j.econmod.2015.02.018
  3. Cassidy, J. F. and B. Andreosso (2006), "Spatial Determinants of Japanese FDI in China", Japan and the World Economy, 18(4), 512-527. https://doi.org/10.1016/j.japwor.2004.11.004
  4. Christmann, P., D. Day and G. S. Yip (1999), "The Relative Influence of Country Conditions, Industry Structure, and Business Strategy on Multinational Corporation Subsidiary Performance", Journal of International Management, 5(4), 241-265. https://doi.org/10.1016/S1075-4253(99)00015-0
  5. Chung, Youn-Kyaei (2015), "The Effect of Production Strategy of Small and Medium Sized Enterprise Extending its Business to Chinese Market on Business Performance", The Journal of Professional Management, 18(3), 105-123.
  6. Conconia, P., A. Sapira and M. Zanardic (2016), "The Internationalization Process of Firms: From Exports to FDI", Journal of International Economics, 99(3), 16-30. https://doi.org/10.1016/j.jinteco.2015.12.004
  7. Cui, L. and F. M. Jiang (2009), "FDI Entry Mode Choice of Chinese Firms: A Strategic Behavior Perspective", Journal of World Business, 44(4), 434-444. https://doi.org/10.1016/j.jwb.2008.11.004
  8. Dic, L., F. H. Hong and G. C. Li (2016), "Assessing the Role of Inward Foreign Direct Investment in Chinese Economic Development, 1990-2007: Towards a Synthesis of Alternative Views", Structural Change and Economic Dynamics, 37(6), 107-120. https://doi.org/10.1016/j.strueco.2016.01.004
  9. Dunning, J. H. (1980), "Toward an Eclectic Theory of International Production: Some Empirical Tests", Journal of International Business Studies, 11(1), 9-31. https://doi.org/10.1057/palgrave.jibs.8490593
  10. Dunning, J. H. (1988), "The Eclectic Paradigm of International Production: A Restatement and Some Possible Extensions", Journal of International Business Studies, 19, 50-84. https://doi.org/10.1057/palgrave.jibs.8490372
  11. Dunning, J. H. (1993), Multinational Enterprises and the Global Economy, Harlow, England: Addison Wesley.
  12. Dunning, J. H. (2000), "The Eclectic Paradigm as an Envelope for Economic and Business Theories of MNE Activity", International Business Review, 9(2), 163-190. https://doi.org/10.1016/S0969-5931(99)00035-9
  13. Enterprise Risk Management (n.d.), Four Quadrants of Business Risk. Available from https://www.erm360.com/tag/risk-quadrants/ (accessed August 14, 2018)
  14. Ferguson, P. R. (1988), The Structure-Conduct-Performance Paradigm. In: Industrial Economics Issues and Perspectives, London, Palgrave.
  15. Fornell, C. and D. F. Lacker (1981), "Evaluating Structural Equation Models with Unobservable Variables and Measurement Error", Journal of Marketing Research, 18(1), 39-50. https://doi.org/10.1177/002224378101800104
  16. Fruman, C. (2016), Why Does Efficiency-Seeking FDI Matter?. Available from http://blogs.worldbank.org/psd/why-does-efficiency-seeking-fdi-matter (accessed August 14, 2018)
  17. Gaffney, N., B. Kedia and J. Clampit (2013), "A Resource Dependence Perspective of EMNE FDI Strategy", International Business Review, 22(6), 1092-1100. https://doi.org/10.1016/j.ibusrev.2013.02.010
  18. Giambona, E. (2017), "The Management of Political Risk", Journal of International Business Studies, 48(4), 523-533. https://doi.org/10.1057/s41267-016-0058-4
  19. Hamilton, R. T. and Y. K. Chow (1993), "Why Managers Divest - Evidence from New Zealand's Largest Companies", Strategic Management Journal, 14(6), 479-484. https://doi.org/10.1002/smj.4250140606
  20. Hilmola, O. P., H. Lorentz, P. Hilletofth and J. Malmsten (2015), "Manufacturing Strategy in SMEs and Its Performance Implications", Industrial Management and Data Systems, 115(6), 1004-1021. https://doi.org/10.1108/IMDS-12-2014-0380
  21. Hong, Jong-Min and Eui-Burm Park (2012), "A Study on the Service Industrial Characteristic of Korean FDI in China", Journal of International Trade & Commerce, 8(2), 409-434. https://doi.org/10.16980/jitc.8.2.201206.409
  22. Hooley, G. I., G. E. Greenley, J. W. Cadogan and J. Fahy (2005), "The Performance Impact of Marketing Resources", Journal of Business Research, 58(1), 18-27. https://doi.org/10.1016/S0148-2963(03)00109-7
  23. Hyun, Hea-Jung (2015), "Do Small and Medium Enterprises Gain from Offshoring?", Journal of Korea Trade, 19(4), 1-20.
  24. Jeung, Jae-Hee and Yeon-Shick Ahn (2015), "An Impact on Management Performance by Risk Management System and Risk Management Factor", Journal of Information Technology Services, 14(3), 117-129. https://doi.org/10.9716/KITS.2015.14.3.117
  25. Jin, Byoung-Ho, Hong-Joo Woo and Jae-Eun Chung (2015), "How Are Born Globals Different from NonBorn Global Firms? Evidence from Korean Small and Medium-sized Enterprises", Journal of Korea Trade, 19(3), 1-19.
  26. Kang, Sung-Jin and Hong-Shik Lee (2007), "The Determinants of Location Choice of South Korean FDI in China", Japan and The World Economy, 19(4), 441-460. https://doi.org/10.1016/j.japwor.2006.06.004
  27. Kim, Byoung-Goo and Jae-Jin Kim (2013), "The Determinants of Korean Subsidiaries' Performance in China: Localization and Intra-Firm Trade between HQ and Subsidiary", Korea Trade Review, 38 (1), 229-253.
  28. Kim, Bo-Ine and Mann-Soo Shin (2010), "Performance Determinants of Korean FDI in China: Moderating Effect of Localization", The Journal of Korean-Chinese Economics and Management, 9(1), 5-26.
  29. Kim, Chang-Bong and S. E. Ronto (2010), "Business Performance, Process Innovation and Business Partnership in the Global Supply Chain of Korean Manufacturers", Journal of Korea Trade, 14(4), 61-83.
  30. Kim, Pan-Jin (2009), "A Study on the Risk Management of Korean Firms in Chinese Market", Journal of Distribution Science, 7 (2), 5-28.
  31. Kim, Soo-Wook, Tae-Ho Kim, Kwang-Ho Choi and Jin-Ah Yang (2014), "Comparative Analysis on the Diversification Effects between Firm Performance and Whole Supply Chain Performance in Korea and Japan", Journal of Korea Trade, 18(1), 1-27.
  32. Kim, Yong-Duk and Jeong-Oh Ham (2015), "An Empirical Study on the Determinants of Performances of Korean FDI Corporations in China", Journal of International Trade and Industry Studies, 20(4), 93-130.
  33. Kinuthia, B. K. and S. M. Murshed (2015), "FDI Determinants: Kenya and Malaysia Compared", Journal of Policy Modeling, 37(2), 388-400. https://doi.org/10.1016/j.jpolmod.2015.01.013
  34. Kline, R. B. (2011), Principles and Practice of Structural Equation Modeling (3rd ed.), New York, NY: The Guilford Press.
  35. Kojima, K. (1978), Direct Foreign Investment: A Japanese Model of Multinational Operations, Abingdon, England: Praeger Publishers.
  36. Lee, Hong-Kyun, Kyung-Doo Nam and Jin-Cheol Lee (2013), "The Effect of Their Investment Environment and Localization on the Sequential Foreign Direct Investment of Korean Firms in China", Journal of International Trade & Commerce, 9(4), 335-362. https://doi.org/10.16980/jitc.9.4.201309.335
  37. Lee, Jong-Keon and Won-Jun Kwak (2015), "The Effect of International HRM Systems on Korean MNC Subsidiary Performance", Journal of Korea Trade, 19(1), 41-57.
  38. Lee, Young-Joo (2010), "An Empirical Study on Identifying the Korean SMEs Liability of Foreignness in Chinese Subsidiaries", The Journal of Korea Research Society for Customs, 11(4), 311-331.
  39. Li, L. Z. and Seong-Su Kim (2010), "A Study on the Relationship Between International HR Policy and HR Effectiveness: The Case of Korean Subsidiaries in China", Journal of Human Resource Management Research, 17(3), 131-156.
  40. Lim, Sung-Hoon (2015), "The Nature of Compromising Foreign Investment Motives and Incentives: The Case of Korean Firms through Multidimensional Scaling Analysis", Journal of Korea Trade, 19(3), 21-39.
  41. Louisot, J. P. and C. H. Ketcham (2014), ERM Enterprise Risk Management: Issues and Cases, New York, NY: John Wiley & Sons.
  42. Mathews, J. A. (2002), "Competitive Advantages of the Latecomer Firm: A Resource-based Account of Industrial Catch-up Strategies", Asia Pacific Journal of Management, 19(4), 467-488. https://doi.org/10.1023/A:1020586223665
  43. Mathews, J. A. (2006), "Dragon Multinationals: New Players in 21st Century Globalization", Asia Pacific Journal of Management, 23(5), 5-27. https://doi.org/10.1007/s10490-006-6113-0
  44. Miller, D. (1987), "The Structural and Environmental Correlates of Business Strategy", Strategic Management Journal, 8(1), 55-76. https://doi.org/10.1002/smj.4250080106
  45. Miller, D. (1988), "Relating Poter's Business Strategies to Environment and Structure Analysis and Performance Implication", Academy of Management Journal, 13(2), 280-308.
  46. Nachum, L. (1998), "World Investment Report 1998: Trends and Determinants", Journal of International Business Studies, 30(3), 637-641. https://doi.org/10.1057/jibs.1999.41
  47. Nam, Yoo-Hyun and Chol Lee (2013), "Developing an Integrated Model of Determinants of Export Performance", International Business Journal, 24(1), 77-118.
  48. Nunnally, J. C. (1978), Psychometric Theory, New York, NY: McGraw Hill.
  49. Olsson, C. (2002), Risk Management in Emerging Markets, London: Pearson Education.
  50. Petri, A. P. (2012), "The Determinants of Bilateral FDI: Is Asia Different?", Journal of Asian Economics, 23(3), 201-209. https://doi.org/10.1016/j.asieco.2011.01.003
  51. Pferrer, J. and G. R. Salancik (1978), The External Control of Organization: A Resource Dependence Perspective, New York, NY: Harper and Row.
  52. Pickford, J. and C. Alexander (2001), Mastering Risk, London: Pearson Education.
  53. Porter, M. E. (1980), Competitive Strategy, New York, NY: The Free Press.
  54. Ramamurti, R. (2009), "What Have We Learned about Emerging-Market MNEs?". In R. Ramamurti and J. V. Singh (Eds.), Emerging Multinationals in Emerging Markets, Cambridge, MA: Cambridge University Press, 399-401.
  55. Rugman, A. M. (2009), "Theoretical Aspects of MNEs from Emerging Economies". In R. Ramamurti and J. V. Singh (Eds.), Emerging Multinationals in Emerging Markets, Cambridge, MA: Cambridge University Press, 42-63.
  56. Stoian, C. and F. Filippaios (2008), "Dunning's Eclectic Paradigm: A Holistic, yet Context Specific Framework for Analysing the Determinants of Outward FDI Evidence from International Greek Investments", International Business Review, 17(3), 349-367. https://doi.org/10.1016/j.ibusrev.2007.12.005
  57. Sung, Yong-Mo and Kyoung-Il Khoe (2009), "A Study on the Localization Strategy and Factors Determining the Performance of Korean Subsidiaries in China", Korea Journal of Business Administration, 22(6), 3743-3765.
  58. Tihanyi, L. and A. S. Roath, (2002), "Technology Transfer and Institutional Development in Central and Eastern Europe", Journal of World Business, 37(3), 188-198. https://doi.org/10.1016/S1090-9516(02)00077-9
  59. Wang, C. H., Y. L. Wen and F. Han (2012), "Study on China's Outward FDI", Procedia Environmental Sciences, 12, 543-549. https://doi.org/10.1016/j.proenv.2012.01.315
  60. Wang, C. Q., J. J. Hong, M. Kafouros and A. Boateng (2012), "What Drives Outward FDI of Chinese firms? Testing the Explanatory Power of Three Theoretical Frameworks", International Business Review, 21(3), 425-438. https://doi.org/10.1016/j.ibusrev.2011.05.004
  61. Yao, S. J., P. Wang, J. Zhang and J. H. Ou (2016), "Dynamic Relationship between China's Inward and Outward Foreign Direct Investment", China Economic Review, 40(9), 54-70. https://doi.org/10.1016/j.chieco.2016.05.005
  62. Yin, H. B. and Z. Chen (2014), "An Empirical Study on the Influencing Factors of Chinese Commercial Bank's Liquidity Risk", Korean Management Consulting Review, 14(3), 1-9.
  63. Yoon, Seung-Ok and Chang-Ho Lee (2012), "A Study on the Conceptual model of Enterprise Risk Management System", Journal of Korea Safety Management and Science, 14(2), 113-121. https://doi.org/10.12812/ksms.2012.14.2.113
  64. Zhang, H. Z., Ki-An Park and Chan-Kyung Kim (2005), "A Study on the FDI Performance Factors: Focused on the Korean Firms in China", International Business Journal, 16(3), 27-64.
  65. Zink, D.W. (1973), The Political Risks for Multinational Enterprise in Developing Countries, New York, NY: Prager.

피인용 문헌

  1. Analysis of risk management performance with innovative approach: a case study of China’s shipping companies vol.47, pp.8, 2019, https://doi.org/10.1080/03088839.2020.1744757