Determinants of Foreign Production Performance in Relation to Motives for Foreign Direct Investment (FDI): An Empirical Analysis

Determinants of Foreign Production Performance in Relation to Motives for Foreign Direct Investment (FDI): An Empirical Analysis

In this paper, the determinants of foreign production performance as affected by motives for foreign direct investment (FDI) of Korean firms in China were explored. The hypotheses derived from a theoretical framework were tested using a survey data of 103 companies in China. It was found that determinants of performance differ depending on the motive for FDI. First, in cases where FDI is motivated by market-seeking, the most significant determinant of performance in both initial and sequential FDI is market potential. On the other hand, when FDI is motivated by resource-seeking, the most significant determinant of performance for initial FDI is labor productivity. Moreover, if FDI is motivated by efficiency-seeking, the most significant determinants of performance for sequential FDI are market potential and labor productivity.