Inward Foreign Direct Investment in Korea: Location patterns and local impacts

Abstract

Multinational Enterprises (MNEs) decide the location of firms in accordance with political, economic, technological, and social conditions. Despite the radically increasing volume of inward FDI in Korea, little attention has been paid to local outcomes of this activity. Thus, the purpose of this research is to analyse spatial, economic and demographic outcomes at both national and Seoul metropolitan levels. Where FDI is destined nationwide and metropolitan-wide; how does spatial distribution of inward FDI vary in different industries; and what spatial impacts can be seen in the city by the flows of FDI into Korea? To answer these research questions, this research uses data of Foreign Invested Enterprises (FIEs) collected by the Ministry of Knowledge Economy of Korea. This dataset includes the location of the firms, industry types, and initial year of foreign investment from the 1960s to the 2000s. Data analysis involves the use of spatial analysis, ArcGIS and regression models. Research findings suggest that FDI tended to highly concentrate in Seoul and its surrounding provinces (called the Capital Region). This spatial concentration was strengthened in the 2000s and was more evident in producer services while manufacturing FIEs dispersed to periphery of Seoul. At a metropolitan level, FIEs appeared in major business centres of Seoul. The accumulation of foreign capital in the urban core has brought local impacts involved with vitality of economic activities and demographic changes due to close connections between donor and host countries.