Foreign Entry Strategies and Sequential Foreign Direct Investment in China by Korean Firms

Foreign Entry Strategies and Sequential Foreign Direct Investment in China by Korean Firms

The objective of this study is to find out the relationship between firms’ initial and sequential Foreign Direct Investment(FDI) decisions by using a sample of 103 manufacturing firms in Korea assuming that a firm’s decision on its initial FDI in China would have considerable influence on its sequential FDI. The results of the statistical analyses provide support for the timing of initial entry; control in initial entry; the interaction effect of the timing of initial entry and control in initial entry; and the interaction effect of the timing of initial entry and resource commitment in initial entry at the 5% level but not for resource commitment in initial entry. In particular, early entrants were more likely to consider early sequential FDI in China. In addition, firms using wholly owned subsidiary(WOS) for their initial entry into China were less likely to consider early sequential FDI. Further, early entrants using WOS for their initial entry were less likely to consider early sequential FDI than late comers. Finally, the relationship between resource commitment and the likelihood/speed of sequential FDI was stronger for early entrants than for late ones.