• Journal of Korea Trade
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• v.24 no.1
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• pp.82-98
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• 2020

Purpose - This study aims to overcome the limitations of existing studies, which linearly determine the precedence factors of competency in overseas subsidiaries. The research objectives are as follows. First, what kind of nonlinear effects does the level of control held by Korean headquarters over foreign subsidiaries have in terms of competency in the subsidiaries? Second, what kind of nonlinear effects do the local experiences of overseas subsidiaries have on their competency? Design/methodology - With data on Korean multinational corporations (MNCs), this paper analyzes the effects of control levels of headquarters (HQs) and host-country experiences of foreign subsidiaries regarding competency in overseas subsidiaries. In particular, this study focuses on nonlinear models, differentiating it from previous studies. In order to examine research hypotheses, this study conducted a survey of overseas subsidiaries of Korean corporations. Surveys were conducted through various methods including e-mail, online questionnaires, fax, and telephone calls. Copies of the questionnaire were distributed to a total of 2,246 overseas subsidiaries, and 409 completed responses were collected. Excluding 15 copies that were insufficiently answered, responses from a total of 394 copies were used for analysis. Findings - This study presents the following results. First, there is a U-shaped relationship between levels of HQ control and competency in foreign subsidiaries. This means that higher levels of HQ control negatively impact the competency levels of subsidiaries because strict control undermines autonomy in subsidiaries. However, if the level of HQ control exceeds a certain point, then the transfer of knowledge between HQs and subsidiaries is facilitated. Knowledge transferred from HQs can be used as prior knowledge by foreign subsidiaries to the benefit of all parties. Accordingly, knowledge transfer negates the negative effects of excessive HQ control and positively affects competency in subsidiaries. Second, there is an inverted U-shaped relationship between the local (host-country) experiences of subsidiaries and competency in foreign subsidiaries. This means that foreign subsidiaries can overcome the liabilities of foreignness and contribute to capability building by accumulating unique knowledge about their host countries. However, if local experiences accumulate excessively beyond a certain point, then the host country-specific experiences of foreign subsidiaries will offset the benefits discussed above. Excessive local experiences not only increase organizational inertia, but also create a problem of goal incongruence due to information asymmetry between HQs and subsidiaries. Therefore, excessive local experiences have negative effects on competency in foreign subsidiaries. Originality/value - This study suggests the following implications. First, unlike existing studies based mainly on linear models, this study presents important theoretical implications in its focus on nonlinear models and its analysis of the effects of HQ control and local experiences on competency in foreign subsidiaries from perspectives of organizational learning theory and agency theory. Second, in terms of practical implications, the results of this study suggest that optimally raising levels of HQ control and managing the local experiences of subsidiaries without increasing organizational inertia is important for enhancing competency in foreign subsidiaries.

• Journal of Korea Trade
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• v.26 no.6
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• pp.1-19
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• 2022

Purpose - This study empirically investigates the effects of Official Development Assistance (ODA) on the economic activities of private actors in recipient countries. As a proxy for the economic activities of private actors, we utilize the job creation activities of foreign subsidiaries in recipient countries. The foreign subsidiaries provide a foundation for economic development by creating paying jobs. That is, if ODA has been successfully transferred to foreign subsidiaries, then these foreign subsidiaries should help economic growth and help create a boom in the local market by providing jobs. These jobs eventually lead to the achievement of the primary aims of foreign aid, including poverty reduction. Thus, this study empirically examines the relationship between ODA and the number of jobs created by foreign subsidiaries in recipient countries. Design/methodology - This is the first study to examine the effects of the ODA on the job creation of foreign subsidiaries because it has been hard to obtain internal information related to the employment status of foreign subsidiaries. Fortunately, we have a unique panel dataset provided by the Export-Import Bank of Korea (KEXIM) for 2006 to 2013. In terms of the empirical specification, we use the generalized least squares (GLS) method. The panel GLS estimator allows us to have an efficient estimation that overcomes the limitations of the panel data. It employs assumptions about the heteroscedasticity between the panels and makes an autocorrelation of the error term within each panel. Findings - We find that ODA influences job creation in foreign subsidiaries. In particular, we found that ODA creates more jobs in sales than in managerial or production positions. This study also shows that the effect of the ODA on the foreign subsidiaries' job creation activities depend on the purpose of the ODA. By examining ODA effects on the foreign subsidiaries' economic activities (e.g., job creation), this study fills a gap in the current literature. Originality/value - Existing studies that focus on the ODA effect have either a macroeconomic point or a microeconomic point of view. However, both approaches do not explain how well foreign aid has influenced private economic actors of recipient countries. In essence, previous researchers found it difficult to obtain the necessary data for internal employment status from foreign subsidiaries. However, thanks to the Korea Export-Import Bank, this study shows that ODA indeed influences the job creation activities of foreign subsidiaries even after controlling for other factors such as FDI, GDP growth rate, employment rate, household expenditure, mother firms' share, etc. By doing so, we can examine how ODA influences the job creation of foreign subsidiaries, which might help economic development and reduce the amount of poverty in recipient countries.

• Journal of Information Technology Services
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• v.23 no.3
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• pp.17-37
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• 2024

This study explores the tendency of corporations and organizations to continue with their current processes despite having incentives for better Information Technology (IT) innovation or transition. In this context, the study argues that organizations may struggle with 'outsourcing inertia,' a well-known concept referring to an organization's deficient adaptability to environmental changes, particularly defined here as the organization's slow adaptation to changes in outsourcing levels. To verify this, the study analyzes how key variables identified from existing IT Outsourcing (ITO) decision-making research and recent studies on cloud computing transitions actually affect a firm's transition intentions. In the process, this study investigates the moderating effect of a firm's outsourcing inertia, utilizing the Technology-Organization-Environment (TOE) framework and the Push-Pull-Mooring (PPM) model based on migration theory to propose a research model. The study aims to contribute to finding strategic approaches necessary for facilitating IT innovation and transition by understanding the impact of outsourcing inertia on the decision-making process related to IT outsourcing. It is important to note that the majority of domestic conglomerates own IT subsidiaries, which significantly influence the process of transitioning to cloud computing. Nevertheless, research on the impact of IT subsidiaries on cloud computing transition is relatively scarce. Based on this background, this study proposes that IT subsidiaries within domestic conglomerates can act as a significant mooring factor of organizational inertia in the decision-making process for adopting cloud computing. Through this, the study seeks to provide strategic insights for overcoming organizational inertia faced by IT subsidiaries during the cloud computing transition process.

• Korea Trade Review
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• v.41 no.2
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• pp.1-28
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• 2016

The purpose of this study is to identity the relationship between CAGE distance and Korean foreign subsidiaries' social responsibility, which is divided into responsive and strategic activities. The hypothesis is that CAGE distance has positive relationships with subsidiaries' social responsibility to overcome local liabilities of foreignness and acquire social legitimacy. The key findings are as follows. Firstly, culture distance has positive significant impacts on subsidiaries' social responsibility activities. It especially has positive influences on strategic CSR. Secondly, administration distance has no impacts on subsidiaries' social responsibility. Thirdly, geographic distance also has positive impacts on subsidiaries' social responsibility activities, especially on responsive CSR. Lastly, economic distance has significantly negative effects on social responsibility. This empirical study identifies the relationships between cross national distance and subsidiaries' social responsibility. Culture and geographic distance has positive influences on subsidiaries' social responsibility. Market seeking subsidiaries group shows more positive relationship between culture distance and social responsibility activities, which means that foreign subsidiaries would engage in social responsibility activities for strategic purpose.

• International Commerce and Information Review
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• v.16 no.5
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• pp.319-342
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• 2014

In this paper, we aim to advance our knowledge about factors influencing rapid globalization of firms in Korea. Through analysing empirically, this study focuses on the effect of technology competencies and marketing competencies and network in Korea rapid globalization. The subject of this study was foreign subsidiaries that entered in korea to expand their business overseas. This study are examined by the sample of 186 foreign subsidiaries operating in Korea. The empirical results from structural equation modeling and regression analysis. Our findings show that marketing competencies, technological competencies and network are key drivers of rapid globalization in Korea market. Meanwhile, we also find that marketing competencies related to overseas market development in B2C foreign subsidiaries and technology competencies related to overseas market development in B2B foreign subsidiaries. And it was revealed in the path analysis using AMOS model that the relevancy of the study model was higher for B2C foreign subsidiaries than B2B foreign subsidiaries and the explanatory power(statistic index) revealed to be 31.9% higher for B2C foreign subsidiaries than B2B foreign subsidiaries in the effect relation on the rapid globalization in Korea market. Company type (B2C/B2B) was revealed moderating factor on the rapid globalization. Our study confirmed that marketing, technological competencies and network of firms effects on the rapid globalization in Korea.

• Journal of Korea Trade
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• v.25 no.2
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• pp.134-151
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• 2021

Purpose - This study empirically analyzes the impact of the internal and external network embeddedness of foreign subsidiaries and local market characteristics of the host country on the CEO selection whether or not to appoint an expatriate as the CEO of a foreign subsidiary. Design/methodology - To conduct an empirical analysis, we obtained a list of the headquarters of Korean MNCs from the Korea Chamber of Commerce and Industry. Based on the list of HQs, we identified a final list of overseas subsidiaries of Korean MNCs that have entered the world from KOTRA (Trade-Investment Promotion Agency for Korea). Then we conducted an empirical analysis based on the results of 391 questionnaires by employing logistic regression analysis. Findings - The results of empirical analysis are as follows. First, the higher the subsidiary's internal network embeddedness, the higher the tendency appoint an expatriate as the CEO. Second, the higher the volatility of the local market, the higher the tendency to appoint an expatriate as the CEO. Third, the stronger the competition in the local market, the lower the tendency to appoint a PCN. Originality/value - This study has significant theoretical implications in that it examines the link between the internal and external embeddedness of overseas subsidiaries and the appointment of parent country nationals (PCNs) as the CEO that prior research has not examined.

• Journal of Korean Society of Industrial and Systems Engineering
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• v.43 no.3
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• pp.29-40
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• 2020

Korean firms have been vigorously searching and exploring overseas market opportunities through export and overseas investment. As of end of 2019, there were more than 80,000 Korean overseas subsidiaries all over the world. With Korean overseas direct investment increasing recently, it became one of the important issues for overseas investors to be successful in the global market. There are a lot of studies on factors influencing the performance of overseas subsidiaries such as 'firm' and 'country' factors. This study empirically examines subsidiary performance determinants with 'industry architectures' by using a sample of 292 overseas Korean firm subsidiaries. Industry architectures are the stable but evolving sets of rules and roles through which labor is divided within a sector. This article considers how industry architectures shape success in international expansion. Industry architectures differ between countries, are not necessarily technologically determined, shape firms' capabilities and their competitive environment, and constitute a distinct level of analysis. We extract antecedents of related theory and empirically test its impact with a survey of Korean firms expanding in emerging economies. We would say this is the first study which tries to focus on industry architectures with the performance of Korean overseas subsidiaries. We find that separability and similarity of industry architectures across countries and localization of subsidiaries are robust and important predictors of success in international expansion. Our results suggest that industry architectures should be added to firm and country as an intermediate level of analysis that helps explain success in international expansion. While we established a pattern, much more remains to be done. We focus on the success of foreign operations, but we do not consider the broader benefits of going abroad, such as the learning or network effects that accrue at the level of the entire firm. The next obvious question is whether the results would differ in the developed market context. These we leave for future research to consider.

• Korea Trade Review
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• v.48 no.2
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• pp.1-26
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• 2023

The purpose of this study is to demonstrate how internal capability adjustments made by subsidiaries in response to local market adaption and market changes, together with the use of internal and external networks, have an impact on the investment performance of such subsidiaries. From the empirical results, it was proven that the larger the extent of internal capability adjustment made by subsidiaries, and the more quickly and flexibly it is implemented, the more positive the investment performance is. The empirical findings also showed that in this process, the use of internal/external network embeddedness has a positive mediating impact on the investment performance. Additionally, the results of statistical analysis support the research hypothesis that external embeddedness has a greater mediating influence on multinational manufacturing companies entering Chinese market than internal embeddedness. It implies to the top managers of subsidiaries that the subsidiary should actively utilize external embeddedness to create a new locational competitive advantage in the local region, as well as develop a strategy to reduce foreignness costs such as cost of adapting to the local system.

• Journal of Korea Trade
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• v.23 no.7
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• pp.64-82
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• 2019

Purpose - This study's the ultimate goal is to analyze competitiveness improvement on multinational enterprises as firstly providing which factors are to strengthen or weaken competitiveness, secondly investigating if hypotheses development and research design is correct and thirdly finding significant implications for research and practices across country specific advantage. Design/methodology - Using feedback data provided by 250 firms, we extracted variable factors and hypotheses, which were empirically carried out by reliability and validity testing, correlation analysis, path analysis, and confirmatory factor analysis to prove which factors are to make the positive effect on the improvement of overseas subsidiaries' management performance and competitiveness. Findings - Through proceeding empirical analysis study, we found out that technology management capability, knowledge management capability, and local management capability had a statistically significant effect on the improvement of overseas subsidiaries' competitiveness, while linked activity capability revealed a negative effect. Originality/value - During business globalization, overseas investments and establishment of overseas subsidiaries have been essential. It is anticipated that this study results would be meaningful for analysis on multinational enterprises' competitiveness and helpful in promoting their entry into Korean market and enhancing their competitiveness. This paper would also help Korea government develops new FDI model and induce more investment from global major companies to Korea region.

• Journal of Korea Port Economic Association
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• v.31 no.2
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• pp.69-83
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• 2015

This study proposes effective overseas market entry strategies that could allow Korean logistics companies to develop international capabilities and become global firms by adapting to environmental changes in global logistics. First, it reviews the overseas networks of Korean international freight forwarders and the recent trends in the global logistics market. Then, it surveys the conditions of two groups of freight forwarders, namely partnerships and subsidiaries, which are categorized according to type of entry into foreign markets. These companies' networks are concentrated in East and Southeast Asia regardless of network type. As a result, the ability for partnerships to network is higher than that of subsidiaries. However, subsidiaries are small in number and located in various regions because of their initial stage, which is why their businesses depend on the price competitiveness of the parent company. The satisfaction and performance of subsidiaries are both generally low according to the presented findings. In addition, the successful strategies of international freight forwarders include following operations, specializing their logistics services, building collaborations among small and medium-sized companies, recruiting and training professional human resources in international logistics, and entering markets together with their customers. Overall, this study highlights the importance of measuring and evaluating objectively the level and performance of overseas networking through a survey about the internationalization of Korean freight forwarder companies. To conclude, this study is considered to contribute to raising their global competitiveness by suggesting strategies derived from the survey findings and SWOT analysis.