• Korean small business review
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• v.31 no.2
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• pp.85-102
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• 2009

With the continued globalization of world markets, transfer pricing has become one of the dominant sources of controversy in international taxation. Transfer pricing is the process by which a multinational corporation calculates a price for goods and services that are transferred to affiliated entities. Consider a Korean electronic enterprise that buys supplies from its own subsidiary located in China. How much the Korean parent company pays its subsidiary will determine how much profit the Chinese unit reports in local taxes. If the parent company pays above normal market prices, it may appear to have a poor profit, even if the group as a whole shows a respectable profit margin. In this way, transfer prices impact the taxable income reported in each country in which the multinational enterprise operates. It's importance lies in that around 60% of international trade involves transactions between two related parts of multinationals, according to the OECD. Multinational enterprises (hereafter MEs) exert much effort into utilizing organizational advantages to make global investments. MEs wish to minimize their tax burden. So MEs spend a fortune on economists and accountants to justify transfer prices that suit their tax needs. On the contrary, local governments are not prepared to cope with MEs' powerful financial instruments. Tax authorities in each country wish to ensure that the tax base of any ME is divided fairly. Thus, both tax authorities and MEs have a vested interest in the way in which a transfer price is determined, and this is why MEs' international transfer prices are at the center of disputes concerned with taxation. Transfer pricing issues and practices are sometimes difficult to control for regulators because the tax administration does not have enough staffs with the knowledge and resources necessary to understand them. The authors examine transfer pricing practices to provide relevant resources useful in designing tax incentives and regulation schemes for policy makers. This study focuses on identifying the relevant business and environmental factors that could influence the international transfer pricing of MEs. In this perspective, we empirically investigate how the management perception of related variables influences their choice of international transfer pricing methods. We believe that this research is particularly useful in the design of tax policy. Because it can concentrate on a few selected factors in consideration of the limited budget of the tax administration with assistance of this research. Data is composed of questionnaire responses from foreign firms in Korea with investment balances exceeding one million dollars in the end of 2004. We mailed questionnaires to 861 managers in charge of the accounting departments of each company, resulting in 121 valid responses. Seventy six percent of the sample firms are classified as small and medium sized enterprises with assets below 100 billion Korean won. Reviewing transfer pricing methods, cost-based transfer pricing is most popular showing that 60 firms have adopted it. The market-based method is used by 31 firms, and 13 firms have reported the resale-pricing method. Regarding the nationalities of foreign investors, the Japanese and the Americans constitute most of the sample. Logistic regressions have been performed for statistical analysis. The dependent variable is binary in that whether the method of international transfer pricing is a market-based method or a cost-based method. This type of binary classification is founded on the belief that the market-based method is evaluated as the relatively objective way of pricing compared with the cost-based methods. Cost-based pricing is assumed to give mangers flexibility in transfer pricing decisions. Therefore, local regulatory agencies are thought to prefer market-based pricing over cost-based pricing. Independent variables are composed of eight factors such as corporate tax rate, tariffs, relations with local tax authorities, tax audit, equity ratios of local investors, volume of internal trade, sales volume, and product life cycle. The first four variables are included in the model because taxation lies in the center of transfer pricing disputes. So identifying the impact of these variables in Korean business environments is much needed. Equity ratio is included to represent the interest of local partners. Volume of internal trade was sometimes employed in previous research to check the pricing behavior of managers, so we have followed these footsteps in this paper. Product life cycle is used as a surrogate of competition in local markets. Control variables are firm size and nationality of foreign investors. Firm size is controlled using dummy variables in that whether or not the specific firm is small and medium sized. This is because some researchers report that big firms show different behaviors compared with small and medium sized firms in transfer pricing. The other control variable is also expressed in dummy variable showing if the entrepreneur is the American or not. That's because some prior studies conclude that the American management style is different in that they limit branch manger's freedom of decision. Reviewing the statistical results, we have found that managers prefer the cost-based method over the market-based method as the importance of corporate taxes and tariffs increase. This result means that managers need flexibility to lessen the tax burden when they feel taxes are important. They also prefer the cost-based method as the product life cycle matures, which means that they support subsidiaries in local market competition using cost-based transfer pricing. On the contrary, as the relationship with local tax authorities becomes more important, managers prefer the market-based method. That is because market-based pricing is a better way to maintain good relations with the tax officials. Other variables like tax audit, volume of internal transactions, sales volume, and local equity ratio have shown only insignificant influence. Additionally, we have replaced two tax variables(corporate taxes and tariffs) with the data showing top marginal tax rate and mean tariff rates of each country, and have performed another regression to find if we could get different results compared with the former one. As a consequence, we have found something different on the part of mean tariffs, that shows only an insignificant influence on the dependent variable. We guess that each company in the sample pays tariffs with a specific rate applied only for one's own company, which could be located far from mean tariff rates. Therefore we have concluded we need a more detailed data that shows the tariffs of each company if we want to check the role of this variable. Considering that the present paper has heavily relied on questionnaires, an effort to build a reliable data base is needed for enhancing the research reliability.

• Korea Trade Review
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• v.42 no.5
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• pp.233-252
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• 2017

The fast changes of global financial environment in recent years increase the risk of trade settlement. This means are required to minimize risk of non payment and to maximize secure payment. Open Account trade accounts for 90% of global trade flows. The O/A system means that the goods, along with all the necessary documents, are shipped and delivered before payment is due, usually within a time frame from 30 to 90 days. Meanwhile, Korean small and medium-sized export enterprises are compelled to globalize their activities owing to limitation and competitiveness of domestic marketplace. To keep face with the global trade settlement system and to support globalization of small and medium-sized export firms, the BPO together with Supply Chain Finance will be solutions. The introduction of the BPO system will allow banks to broaden O/A offerings to their client base and due to secure safety, sellers could ship the goods without delay according to orders and buyers could settle promptly by payment undertaking of correspondent banks. Therefore, it is more effective for companies which have sustainable customers and stable transaction. This study take a look at the trend of the global payment systems and suggested limitation of existed payment in order to derive improvement measures of electronic payment for small and medium-sized export enterprises.

• Asia-Pacific Journal of Business Venturing and Entrepreneurship
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• v.11 no.3
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• pp.37-48
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• 2016

The purpose of this study is to investigate the factors that affect the degree of export intensity of Korean venture businesses, and to analyze the effect of export intensity on corporate performance. We use 1,970 firm data (from Venture Business Survey by Small & Medium Business Administration) and analyze the possible factors of the CEO characteristics, the corporate characteristics, and the environmental factors. Our analysis shows that Korean venture business' CEO characteristics, such as his/her doctoral degree and marketing work experiences, increase their export intensity statistically significantly, while their age does not. In addition, the companies who outsource their products have a higher export intensity, and, as the firm age increases, the export intensity decreases significantly. It is also analyzed that, as the number of export regions or FDI regions increases, their export intensity goes higher. However, firms' higher level of internationalization does not bring higher performance of the venture firms, while it does significantly for the venture firms that are older than 10 years. The result implies that CEO's education or work experiences and strategic approaches are important for corporate globalization, and that it takes time for globalizing venture firms to be able to garner profits from their global investments.

• Journal of Korea Technology Innovation Society
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• v.20 no.1
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• pp.62-80
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• 2017

The purpose of this paper is to explore the relationship between industrial regulations and the R&D activities of firms by analysing the case of manufacturing enterprises in Korea. The sample is gathered from the 2012 Korean Innovation Survey data of Korean Institute of Science & Technology Evaluation and Planning and merged with Korean Regulation Index data of Korean Institute of Public Administration. The Ordinary Least Square (OLS) as well as 2 Stage Least Square (2SLS) regression results show that the impact of the level of the manufacturing field's regulation on firms' R&D activities or inputs may be both positive and negative, depending on the size of the firms. The analysis results suggest that regulatory policy makers need to formulate and implement R&D programs that consider the different effects of industrial regulations on large enterprises or Small and Medium sized Enterprises (SMEs).

• Journal of the Korea Academia-Industrial cooperation Society
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• v.15 no.8
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• pp.4881-4894
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• 2014

This study selected 83 manufacturing firms that had been delisted from the KOSDAQ market from 2009 to 2012 and the sample firms for the two-paired sampling method were compared with 83 normal firms running businesses with same items or in same industry. The 75 financial ratios for five years immediately before delisting were used for Mean Difference Analysis with those of normal firms. Fifteen variables assumed to be significant variables for five consecutive years out of the analysis were used to in the Dichotomous Classification Technique, Logistic Regression Analysis and Discriminant Analysis. As a result of those three analyses, the Logistic Regression Analysis model was found to show the greatest discrimination. This study is differentiated from previous studies as it assumed that the firm's failure proceeded slowly over long period of time and it tried to predict the firm's failure earlier using the five years' historical data immediately before failure, whereas previous studies predicted it using three years' data only. This study is also differentiated from the proceeding comparative studies by its statistically complex Multi-Variate Analysis and Dichotomous Classification Analysis, which general stakeholders can easily approach.

• Journal of the Korean Geographical Society
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• v.29 no.2
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• pp.117-136
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• 1994

Contemporary global space economy is so dynamic that any one specific structural force can not explain the whole dynamic processes or trajectories of spatial industrial development. The major purpose of this paper is extending the traditional notion of industrial districts to functioning and development of new industrial districts with relation to the development of high technology industries. Several dynamic forces, which are dominated in new industrial districts in the modern space economy, are incorporated in the formation and dynamic aspects of new industrial districts. Even though key forces governing Marshallian industrial district are localization of small firms, division of labor between firms, constructive cooperation, and industrial atmosphere, Marshall points out a possibility of growing importance of large firms and non-local networks in the districts with changes of external environments. Some of Italian industrial districts can be regarded as Marshallian industrial districts in broader context, but the role of local authorities or institutions and local embeddedness seem to be more important in the Italian industrial districts. More critical implication form the review of Marshallian industrial districts and Italian industrial districts is that the industrial districts are not a static concept but a dynamic one: small firm based industrial districts can be regarded as only a specific feature evolved over time. Dynamic aspects of new industrial districts are resulting from coexistence of contrasting forces governing the functioning and formation of the districts in contemporary global space economy. The contrasting forces governing new industrial districts are coexistence of flexible and mass production systems, local and global networks, local and non-local embeddedness, and small and large firms. Because of these coexistence of contrasting forces, there are various types of new industrial districts. Nine types of industrial districts are identified based on local/non-local networks and intensity of networks in both suppliers and customers linkages. The different types of new industrial districts are described by differences in production systems, embeddedness, governance, cooperation and competition, and institutional factors. Out of nine types of industrial districts, four types - Marshallian; suppliers hub and spoke; customers hub and spoke; and satellite - are regarded as distinctive new industrial districts and four additional types - advanced hub and spoke types (suppliers and customers) and mature satellites (suppliers and customers) - can be evolved from the distinctive types and may be regarded as hybrid types. The last one - pioneering high technology industrial district - can be developed from the advanced hub and spoke types and this type is a most advanced modern industrial district in the era of globalization and high technology. The dynamic aspects of the districts are related with the coexistence of the contrasting forces in the contemporary global space economy. However, the development trajectory is not a natural one and not all the industrial districts can develop to the other hybrid types. Traditionally, localization of industries was developed by historical chances. In the process of high technology industrial development in contemporary global space economy, however, policy and strategies are critical for the formation and evolution of new industrial districts. It needs formation of supportive tissues of institutions for evolution of dyamic pattern of high technology related new industrial districts. Some of the original distinctive types of new industrial districts can not follow the path or trajectory suggested in this paper and may be declined without advancing, if there is no formation of supportive social structure or policy. Provision of information infrastructure and diffusion of an entrepreneurship through the positive supports of local government, public institutions, universities, trade associations and industry associations are important for the evolution of the dynamic new industrial districts. Reduction of sunk costs through the supports for training and retraining of skilled labor, the formation of flexible labor markets, and the establishment of cheap and available telecommunication networks is also regarded as a significant strategies for dynamic progress of new industrial districts in the era of high technology industrial development. In addition, development of intensive international networks in production, technology and information is important policy issue for formation and evolution of the new industrial districts which are related with high technology industrial development.

• Journal of the Korean Geographical Society
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• v.29 no.2
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• pp.137-165
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• 1994

Structural adjustment of industry (or industrial restructuring) seems to be inherent in the process of capitalist economic development, which tends to be proceeded with shifts from one stage to another in order to overcome structural crises generated in each stage. The structural adjustment of industry is necessarily accompanied with regional restructuring, since it is not only projected on spece, but also mediated by space. Such a restructuring necessitates industrial and uneven regional devlopment through which capital can seek excessive profits over the rate of socio-spatial average. The industrial restructuring and uneven regional development in the 1980s in Korea can be seen as a process in which capital attempted with a strong support of the govenment to overcome the crises in the end of 1970s and hence to go on rapid economic growth. In this process, capital, especially monopoly capital concentrated into few conglomerates, pursued both extensive expansion and intensive development of industry simultaneously. In results, the Korean economy could eliminate some of peripheral characters and maturate the Fordist accumulation system. The extensive expansion of the Korean industry in the 1980s was stimulated mainly through the enlargement and adjustment of investment for equipment facilities which was planned to exclude or rationalize traditional light industries on some places, and to continue rapid growth of key heavy-chemical industries, especially of fabricated metal industry, on other places. In this process, keeping mainly the existing developmental axis which polarized the Seoul Metroplitan region and the Southeast region in Korea, the enhancing spatial mobiiity of capital and the further differentiating division of labour enforced a tendency of concentration of all types of industry in the Seoul Metropolitan region, and at the same time provoked the diffusion of some industries over Jeolla and Chungchong regions in a considerable extent. The intensive development of industriai structure in the 1980s was pursued through the strategic encouragement of subcontracting small firms mainly which produced assembling components, the technical enhancement and factory (semi-) automation, and the enrichment of service industries for estate management, finance, distribution and retailing which supported and complemented the production of goods. In this process, enabling capital to extend and elaborate its domination over space through the reorganization of regulating systems, the Fordist division of labour generated a socio-spatial hierarchy in the nation-wide scale that characterized: the Seoul Metropolitan region as an overmaturated (or overarching) Fordist region performing the conceptive functions of management, research and development, in which all types of industry (including service industries) tended to be reconcentrated; Kyungsang region as a maturated Fordist region with excutive branches of large conglomerates and with subcontracting firms around them which produced standardized products through the automized production processes in secialized Fordist industries or rationalized traditional industries; and Jeolla and Chungchong regions as newly devloping Fordist regions with newly migrated branches and some subcontracting small firms-in relatively older Fordist industries or partly rationalized traditional industries. From these analyses, it can be argued that the structural adjustment of the Korean industry in the 1980s, which had carried out both through the extensive expansion and the intensive deveiopment, strengthened further uneven regional development process, even though it appears to have reduced apparently the economic and regional disparity by balancing numerically large and small firms and by extending the Fordist industrial space nation-wideiy. And it seems more persuasive to see that the Korean industrial structure in the 1980s maturated the Fordist system of accumulation, but not yet transformed towards the post-Fordist (or the so-called flexible) accumulation system, even though the Korean economy in the 1990s seems to be under a pressure of restructuring towards the latter system.

• Journal of the Korean Society of Clothing and Textiles
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• v.32 no.12
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• pp.1903-1914
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• 2008

The purpose of this study was to propose an efficient and feasible global market entry strategy for the Korean apparel industry by analyzing the Italian fashion industry. In particular, the study investigated the role of foreign exhibitions and showrooms supported and organized by Italian fashion organizations. The methodology for this study was to analyze industrial reports, review previous studies and conduct in-depth interviews with 23 industry experts in Italy, Korea and LA. The results indicated that the most prominent factor in the Italian fashion industry was the fashion cluster, which is a strong and organic network of diverse fashion related areas No matter the size of the enterprise, firms can get practical, prompt and efficient support from diverse associations. The network operated by the associations provides strong support to each firm by organizing collections and exhibitions, and providing promotional activities. Showrooms and agents are another supportive "gate keeper", directly related to an enterprise's sales. However, Korean fashion firms did not have enough information or knowledge for foreign exhibitions, nor did they make aggressive promotional efforts in the global market. Despite the many fashion-related associations exist in Korea, their programs are too focused on visible accomplishments and are too oriented on "big company" and "big voice", rather than many "small firms". In conclusion, the Korean fashion industry-particularly the fashion industry in Seoul-has strong potential to become the center of the global fashion market in the future. However, the fashion support system that can act as the channel to promote firms and to meet global buyers needs to be supplemented. To feasibly create this system, government or industry associations should develop a strong and generous support system and network, and they must recognize the need for small firms to exist.

• Journal of the Korean association of regional geographers
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• v.6 no.1
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• pp.1-28
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• 2000

The purpose of this study is to clarify the suburbanization of manufacturing, and location and linkages of decentralized manufacturing from Metropolitan Pusan by means of case study on manufacturing location and linkages in the suburb of Metropolitan Pusan. Kimhae city and Yangsan-Gun toward which heavy decentralization of manufacturing from the Metropolitan Pusan has been done. Both hard data and soft data were used as the basic data. Hard data are the statistical data in statistical yearbooks and firm list in directories. The former consists of the number of establishments and employees classified by product type, firm size and unit area. The latter consists of owner's names, addresses, employee number, products and headquarters of firms. Soft data are the results of the interviews with the 242 owners of firms in the four case study areas selected by Proportional Stratified Sampling Method. The major findings are as follows: 1. The spatial variations of manufacturing in the suburb was regularized in the latter half of 1970's. The primary processes to decentralize manufacturing from Metropolitan Pusan were the birth, relocation and establishment of branches of the firms. Among them the relocation of small outer-oriented single-location firms from Pusan was the most important. 2. The spatial variations undergoing spatial expansion of manufacturing distribution and increase of agglomeration degree of manufacturing, proceeded from the adjacents of Metropolitan Pusan to the outer areas along the main transportation route. 3. The main factors which caused manufacturing to decentralize from the Metropolitan Pusan were firm policy and land for this policy. The main locational factors which induced the decentralizing manufacturing into the suburb were land, market and transportation. 4. The strength of linkages with the outside of the study area is stronger than that of linkages with the inside. There is distance-decay-function in the strength of linkages with the outside, and linkages with short distant areas are stronger than those with long distant areas. 5. The ranges of spatial linkages in procurement of materials, in subcontraction and in marketing are wider than those in ordering. 6. The main factors which cause the formation of linkages are different by types of linkages: monopolistic and oligopolistic supply are important in procurement linkages; characteristics of products and the subsequent marketing difficulties, in subcontraction linkages; fluctuation, cost reduction, insufficient facility and characteristics of products, in ordering linkages; subcontract, characteristics of product and the subsequent marketing difficulties, in marketing linkages. 7. The changes of linkages owing to locational changes of firms were great, and were greater in long distant areas than in short distant areas. 8. The main factor influencing on the changes of linkages was the easiness in the transportation of goods, movement of labour and contacts with customers. In conclusion, some facts described above were proved to be consistent with the results of proceeding studies in the other areas: influence of relocation of decentralizing firms on the suburbanization; the factors of manufacturing decentralization; spatial characteristics of linkages; linkage changes owing to relocation of firms. Some were proved to be partly consistent: locational factors inducing decentralized manufacturing into the suburb were proved to be inconsistent. I think that the results of previous studies on the other areas can be applicable to the explanation on the decentralization of Metropolitan manufacturing from the viewpoint of the suburb. For the better explanation on the decentralization of Metropolitan manufacturing, more empirical case studies on the suburbanization of manufacturing are necessary.

• Journal of Intelligence and Information Systems
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• v.21 no.3
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• pp.79-99
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• 2015

The prediction of bankruptcy has been extensively studied in the accounting and finance field. It can have an important impact on lending decisions and the profitability of financial institutions in terms of risk management. Many researchers have focused on constructing a more robust bankruptcy prediction model. Early studies primarily used statistical techniques such as multiple discriminant analysis (MDA) and logit analysis for bankruptcy prediction. However, many studies have demonstrated that artificial intelligence (AI) approaches, such as artificial neural networks (ANN), decision trees, case-based reasoning (CBR), and support vector machine (SVM), have been outperforming statistical techniques since 1990s for business classification problems because statistical methods have some rigid assumptions in their application. In previous studies on corporate bankruptcy, many researchers have focused on developing a bankruptcy prediction model using financial ratios. However, there are few studies that suggest the specific types of bankruptcy. Previous bankruptcy prediction models have generally been interested in predicting whether or not firms will become bankrupt. Most of the studies on bankruptcy types have focused on reviewing the previous literature or performing a case study. Thus, this study develops a model using data mining techniques for predicting the specific types of bankruptcy as well as the occurrence of bankruptcy in Korean small- and medium-sized construction firms in terms of profitability, stability, and activity index. Thus, firms will be able to prevent it from occurring in advance. We propose a hybrid approach using two artificial neural networks (ANNs) for the prediction of bankruptcy types. The first is a back-propagation neural network (BPN) model using supervised learning for bankruptcy prediction and the second is a self-organizing map (SOM) model using unsupervised learning to classify bankruptcy data into several types. Based on the constructed model, we predict the bankruptcy of companies by applying the BPN model to a validation set that was not utilized in the development of the model. This allows for identifying the specific types of bankruptcy by using bankruptcy data predicted by the BPN model. We calculated the average of selected input variables through statistical test for each cluster to interpret characteristics of the derived clusters in the SOM model. Each cluster represents bankruptcy type classified through data of bankruptcy firms, and input variables indicate financial ratios in interpreting the meaning of each cluster. The experimental result shows that each of five bankruptcy types has different characteristics according to financial ratios. Type 1 (severe bankruptcy) has inferior financial statements except for EBITDA (earnings before interest, taxes, depreciation, and amortization) to sales based on the clustering results. Type 2 (lack of stability) has a low quick ratio, low stockholder's equity to total assets, and high total borrowings to total assets. Type 3 (lack of activity) has a slightly low total asset turnover and fixed asset turnover. Type 4 (lack of profitability) has low retained earnings to total assets and EBITDA to sales which represent the indices of profitability. Type 5 (recoverable bankruptcy) includes firms that have a relatively good financial condition as compared to other bankruptcy types even though they are bankrupt. Based on the findings, researchers and practitioners engaged in the credit evaluation field can obtain more useful information about the types of corporate bankruptcy. In this paper, we utilized the financial ratios of firms to classify bankruptcy types. It is important to select the input variables that correctly predict bankruptcy and meaningfully classify the type of bankruptcy. In a further study, we will include non-financial factors such as size, industry, and age of the firms. Thus, we can obtain realistic clustering results for bankruptcy types by combining qualitative factors and reflecting the domain knowledge of experts.