Korean Export Research Articles

Cyclical and Structural Aspects of the Recent Export Trends: Evidence from Korea

Purpose – This paper investigates the recent trade collapse, recovery, and prolonged slowdown to shed light on the discussions about whether the current slowdown is structural or cyclical. I examine structural, cyclical, and heterogeneous aspects of the recent trade trends using detailed statistics of a small open economy, South Korea, whose economic success and growth have been heavily dependent on exports. Design/methodology – I use both aggregated and disaggregated trade statistics of South Korea. I apply the following methodologies: 1) I decompose the trade growth into the extensive and the intensive margin and observe the effect of prices over time. 2) I estimate the trade-income elasticities focusing on the world’s import demand, separately for goods from the world and from Korea. 3) I compare the drop in goods exports in slowdown and trade collapse, which are the two unusual periods in the recent history when world trade has substantially dropped altogether. Findings – I show that while the last drop of trade after 2015 has cyclical aspects, there is evidence that the continued slowdown from 2012 is structural: 1) the so-called ‘China factor’ is found in the analysis of trade-income elasticity of the world and China for imports from Korea. 2) The bilateral trade barriers between Korea and its principal trading partners are universally tightening. 3) Firm sizes, destination countries, and the mode of transactions affect disaggregated trade flows during the slowdown periods. Originality/value – This paper contributes to the debate regarding whether the current trade slowdown is structural or cyclical. I provide two concrete evidence that the export drop in 2015 stems from low oil prices: one is the divergence of Korean export value index from its export quantity index, which started in late 2014 when oil prices plunged. I also contribute to the literature by providing evidence that Korea’s trade barriers with important trading partners are steadily increasing since 2012 as the protectionist measures toward Korea’s export products are steeply increasing after the global financial crisis.

The Impact of TBT and SPS Measures on Japanese and Korean Exports to China

(1) Background: As countries with troubled histories, China, Japan, and Korea have, in recent times, attempted to overcome political and economic differences in a bid to forge strong trade relationships. However, Non-Tariff Measures (NTMs) have emerged in recent times, which has the potential to complicate matters. (2) Method: Our study analyzes the impact that two forms of NTM, technical barriers to trade (TBT) and sanitary and phytosanitary measures (SPS), have on Japanese and Korean exports to China. In order to effectively measure their impact, we utilize a modified version of the Gravity model and the Poisson Pseudo Maximum Likelihood method (PPML). Using three measures (coverage ratio, frequency index, and the dummy variable) to determine their impact, our study displayed a range of findings. (3) Results: The key results from our study showed that from a coverage ratio perspective, our research clearly demonstrates that Chinese TBT measures, reduce Japan and Korea’s manufacturing and total exports as a whole, while Chinese SPS measures encourage Korean agricultural exports. Moreover, the frequency index results and dummy variable estimations in the main also supported the coverage ratio findings with SPS measures promoting Korean agricultural goods exports. (4) Conclusions: Our research highlights the important role the TBT measures have played to shelter China’s emerging industrial sector from the rigors of highly competitive Korean and Japanese exporters. In doing so, the Chinese government is able to actively pursue some of its key sustainable development strategies such as “Made in China 2025” and “Industrial 4.0”.

Detection of Earnings Management as a Measure of Income Smoothing on Fluctuations in Exchange Rates: Managerial Implications for Korean Exporters

Purpose – Foreign Exchange Rates (FER) have been one of the most significant factors for both Korean exporters and the economy of Korea. The purpose of this study is to evaluate whether exporters with a high level of Exchange Rate Elasticity of Sales (ERES) make the use of earnings management for Income Smoothing (IS). Design/methodology – Income smoothing was obtained using the methodology suggested by Leuz, Nanda and Wysocki (2003). Accruals-based Earnings Management (AEM) was estimated using Discretionary Accruals (DA) calculated by the operant Jones Model developed by Dechow, Sloan and Sweeney (1995). Real Earnings Management (REM) was obtained using the methodologies suggested by Roychowdhury (2006) and Cohen and Zarowin (2010). Data were 2,402 firm years of public listed companies on the KRX, which were not in the financial industry and had a settlement of accounts in December for the period from 2013 to 2017. Findings – Results of the evaluation are as follows. First, companies with higher levels of ERES have relatively lower levels of smoothing of reported income. This might be because a fluctuation in sales caused by an exchange rate fluctuation has a direct impact on the volatility of the reported income. Second, companies with high levels of both ERES and IS have a positive correlation with both AEM and REM. This might be because companies with high levels of IS engage in earnings management to smooth reported income. Specifically, it is possible to assume that for smoothing the reported income, not only AEM but also REM is practiced. Third, companies with high levels of ERES but low levels of IS have a negative correlation with both AEM and REM. This could be interpreted as companies exhibiting low levels of IS due to higher levels of ERES tend to control IS. In addition, such results were supported by firms relying highly on exporting, and are consequently sensitive to exchange rate fluctuation. Therefore, it may conclude that companies with high levels of ERES make the use of earnings management as a means of IS. Originality/value – This study can find its significance from the fact that it is the first study, empirically verifying that companies of Korea, where exportation is a large part, use both AEM and REM as a means for smoothing reported income upon facing exchange rate fluctuations. In addition, it is highly expected that the results of this study could be useful for participants of financial markets when making IS-related decisions.

A Study on the Value Added Criterion of Rules of Origin under FTAs with the US and EU: Focusing on Automotive Sector

Purpose - This study deals with a strategic plan for meeting the value added criteria effectively, which is one of the methods of determining origin used in preferential trade such as FTA. Automobile products, one of the major Korean export items, were selected to give a practical use against the FTA requirements. Design/methodology - This study is based on the value-added criteria of the Korea-US and Korea-EU FTAs that apply various value-added criteria. The Korea-US FTA adopts the RVC method based on the integration, deduction and net cost methods, while the MC method is employed in the Korea-EU FTA. The methodology used in this work is an extended literature review, analysis of the value-added criteria applied to automobile products under Korea-US and Korea-EU FTA with some secondary statistics. Findings - Based on in - depth analysis of the value - added criteria requirements for automobile products stipulated in the Korea - US FTA and the Korea - EU FTA, two strategic considerations are suggested. First is ‘appropriate value-added strategy’ and the second is ‘strategy of changing production and trade structure’. The second strategy is a bit used in Korea but this is not considered best if the first strategy is ignored or forgotten. The second one is meaningful when this becomes inevitable. Research limitations/implications - This study is primarily designed to assist Korean auto mobile industry players exporting to EU and USA but this may help to auto part or material producers in FTA counter party territories being EU or USA as the preferential tariffs are applied on a inter region basis. A further research other than auto mobiles using other major FTAs might be followed later. Originality/value - There has been so far little research on strategic factors to meet the value-added origin requirements. This study, therefore, is expected to contribute facilitating the decision of FTA origin and to improve the utilization of FTA by allowing exporting companies using value added criterion to more smoothly meet origin requirements. This will also enable the tax authorities to utilize the value-added criterion to validate effectively the origin of imports where preferential tariffs are applied.

Effects of AEO-MRA on the Performance of Exporters and Importers in Korea

Purpose - This study analyzes the effect of the authorized economic operator-mutual recognition arrangement (AEO-MRA) on the performance of Korean exporters and importers. The effect of the import-export companies’ characteristics, such as annual sales, the number of foreign markets, and overseas experience, on the AEO-MRA is deduced; the relationship between this effect and firm performance is analyzed. Design/methodology - An empirical research model was constructed and analyzed using structural equation modeling. The effect of AEO-MRA on logistics and operational performance was derived from the aforementioned characteristics as leading factors of the AEO-MRA. The regulatory influence of cooperation with logistics companies was analyzed in the AEO-MRA effect on logistics performance. Thus, 172 valid samples were obtained from import-export companies certified by the AEO-MRA. Findings - Among the aforementioned characteristics, only “annual sales” has a positive effect on the AEO-MRA, whose effect enhances logistics and operational performances. The AEO-MRA effect did not directly affect operational performance. Owing to the adjustment effect analysis, the AEO-MRA effect and logistics performance relationship is strengthened if the cooperative relationship with the logistics company is higher than a certain level. If this cooperation falls below a certain level, the AEO- MRA effect on logistics performance reduces. Thus, logistics cooperation is an important factor in the AEO-MRA effect and logistics performance relationship. Originality/value - Hinging on the resource-based theory and relational viewpoint, an empirical model that explains the relationship between the AEO-MRA effect and firm performance is established.

한국수출기업의 GVC 통합 솔루션 구축전략과 수출성과 결정요인

한국수출기업의 GVC 통합 솔루션 구축전략과 수출성과 결정요인

Strategies for Korean Export Expansion to Indonesia through Online Retail Distribution Market (B2C)

Strategies for Korean Export Expansion to Indonesia through Online Retail Distribution Market (B2C)

Leverage Effect of HRCI Volatility and the Volatility Impact on Korean Export Container Volume before and after the Global Financial Crisis: Application of ARIMA-EGARCH and GIRF

In this study, the leverage effect of HRCI volatility and the volatility impact on Korean export container volume were analyzed using the ARIMA-EGARCH model. Empirical results reveal a leverage effect due to the asymmetry of negative news having more influence on the increase in volatility than positive news. In addition, the empirical results considering the structural change show that the magnitude of the leverage effect reduced after the global financial crisis. More importantly, the GIRF results indicate that the negative impact of HRCI volatility on Korean export container volume is less after the crisis than before the crisis period.

Analysis on the determinants of currency invoicing in Korean trade

AbstractWe investigate the determinants of currency invoicing in trade using import and export transactions data between Korea and its 30 major trading partners from 2000 to 2013. We find a noticeably different pattern of currency invoicing from advanced countries. For example, a large market share of Korean exporters in partner countries does not guarantee more use of the Korean won in currency invoicing. This might be attributed to a low degree of Korean won's internationalisation and the strong coalescing effect. We also observe that the higher the level of industry product differentiation, the weaker the coalescing motive. In addition, we verify that the share of invoicing in the currency of Korea's trading partner tends to be higher when the partner country has (i) a larger trade volume, (ii) higher level of financial development, (iii) lower inflation and lower price volatility and (iv) its own currency with lower transaction costs.

Why did the terms of payment in international trade change so much?

ABSTRACTThis article examines factors contributing to the substantial change in the terms of payment, such as letter of credit (LC) and cash terms, in Korean export transactions during the period 1997–2015, using the Autoregressive Distributed Lag bounds test approach. We find that high competition in the world market, the expansion of exports of information technology products and intra-firm trade, and the improvement of information and communication technology (ICT) decrease the share of exports on LC terms in total exports in the long run. However, the increase in exports to developing countries raises the use of LC terms. On the other hand, the increase in intra-firm trade and ICT improvement raise the share of exports settled in cash, and higher trust between trading partners increases the use of cash terms.

The Management of International Distribution Channels : Focusing on the Perspective Korean Exporting Companies

Purpose - The objective of this research is to investigate how selected Korean General Trading Companies, (KGTCs), manage their international...

Determinants of brand localization in international markets

A key marketing strategy decision area for firms in the international marketplace concerns the standardization or localization of brands across national markets. Drawing upon international marketing and brand management literature, this study conceptualizes and examines brand localization using the four brand elements. From the contingency perspective, a set of internal and external environmental determinants are hypothesized to influence the localization of brands in foreign markets. Based on field interviews with Korean exporters, we conduct a survey method to collect data via e-mail from Korean firms engaged in exporting. The final sample consists of 232 exporters across diverse industries. The results from a structural equation model indicate that firms’ extent of internationalization, research and development intensity, firm size, foreign market similarity vis-a-vis home market, and market uncertainty are significantly related to brand localization. Thus, the proposed factors are significant predictors of brand localization by Korean firms in international markets.

Priorities of the Republic of Korea in Integration Projects

The article deals with the main purposes, opportunities and risks of the Republic of Korea’s involvement in integration projects. The author stresses the basic principles of South Korean foreign economic strategy, including common views of the different president administrations on key foreign economic priorities, including constant support of business expansion towards the most prominent markets. The analysis focuses also on new methods of support of national business interests: the transition from rigid defense of domestic market to adoption to growing competition at home as far as foreign partners agreed to open their markets to South Korean export. The paper describes role of bilateral Free Trade Agreements (FTA) and regional mega-projects in South Korea’s foreign economic diplomacy. Comparison study of bilateral Free Trade Agreements between the Republic of Korea on the one side, European Union, the USA and China on the other sides. The author characterizes growing role of China and other East Asian countries for South Korean economy the ROK-China Free Trade Agreement, including some obstacles and limitations to upgrade development of bilateral economic exchanges. Special attention paid to positive and negative factors, influenced on economic integrations between China, Japan and the Republic of Korea. The paper describes Seoul’s interests in economic integration projects in East Asia, including involvement in joint economic projects with ASEAN. The author analyses the Republic of Korea’s attitude to regional mega-projects in Asia-Pacific region such as Trans-Pacific Partnership. Finally the article describes modern stage and possible development of Russia-South Korea economic relations and contains forecast of the main trends of the Republic of Korea’s involvement in integration projects in East Asia and in Asia-Pacific region in general.

An analysis of Korea's export performance using US import data

ABSTRACTThis paper assesses the relative sophistication of the Korean export products in manufacturing industry both across and within products between 1989 and 2012 using the very detailed United States import data. I first compare Korea's export performance in the US market in terms of market share, product penetration and export similarity to those of its rival countries. Next, I propose far more extensive estimates of difference in export quality between Korea and its trading rivals. The estimated quality difference reveals substantial heterogeneity across products and countries. In particular, this paper shows that the current greatest competitor of Korea is still Japan in the US market, but China is steadily climbing up the quality ladder and is chasing after Korea.

Identifying the dispersion of the Pareto productivity distribution in international trade

Most of the heterogeneous firm studies use the Pareto distribution of productivity. This paper identifies the Pareto parameter by relying on guidance from monopolistic competition models. The application to Korean export industries reports that the dispersion of productivity varies across industries.

The Effect of Environmental Capabilities on Environmental Strategy and Environmental Performance of Korean Exporters for Green Supply Chain Management

ABSTRACT The objective of this research is to verify the relationships between environmental capabilities, environmental strategy and environmental performance. To achieve the objective, this research collects and analyzes 219 data responded by the members of the Korea International Trade Association. Reliability and validity of the data are tested by an exploratory factor analysis and a confirmatory factor analysis. The relationships between the variables are tested by an analysis of structural equation modeling. The results are as follows. First, environmental capabilities of Korean exporters have a positive effect on environmental strategy. Capabilities of the firms as an internal resource are based on performing strategy. Firms which have superior environmental capabilities can be possible to make an effort on cooperative environmental improvement among departments and this is based on environmental collaboration with customers and suppliers. Second, external environmental strategy of Korean exporters has a positive effect on environmental performance. Environmental collaboration with customers and suppliers is based on attaining superior environmental performance. Third, environmental capabilities of Korean exporters have a positive effect on environmental performance. Environmental capabilities as a strategic resource of the firms are based on achieving a high level of environmental performance, and the firms can attain a sustainable competitive advantage in the market. Therefore, environmental capabilities of Korean exporters have a direct effect of environmental strategy and environmental performance.

데이터 마이닝 기법을 활용한 한국 수출상품의 중국 지역별 판매 분석

본 연구는 국내 유명 기업의 중국 내 각 성시 (省市)에 진출한 200개 지점의 연간 판매 데이터를 바탕으로 중국 각 지역별 선호 브랜드를 조사하고 효과적인 대중국 수출을 위한 고객의 판매 패턴을 분석하였다. 본 연구는 손실함수와 GIS를 활용하여 기존의 대리점 위치를 재편하는 실무적인 효과를 도출하였다. 또한 초도 배분, 재배분과 관련, 가장 효율적인 수요예측 방법을 통해 계절성의 영향을 상쇄한 시계열 분석을 시행하였다. 더불어, 데이터 마이닝의 일종인 의사결정나무 분석 모델을 활용하여 지금까지 동북 3성으로 분류되어온 지린성, 랴오닝성, 헤이룽장성에서 지리적으로 완전히 다른 판매 패턴을 보이는 헤이룽장성을 분리해내고 새로운 지역권으로 구분하는 실무적 성과를 제시하였다. 뿐만 아니라, 장쑤성은 지리적으로 상하이와 인접하여 남부권으로 분류되어 왔으나, 오히려 산동성과 같은 기후권에서 고객들이 계절성을 가지고 제품을 선택한다는 사실을 입증하였다. 마지막으로 기존 중부권으로 단순 분류되었던 신장위구르 자치구는 그 판매 특성이 다르게 나타나 비록 적은 표본을 가진, 즉 비활성 상권으로 분류된 지역이지만 새로운 거점물류를 개발하고 이를 통해 고객에게 접근하는 것이 효과적이라 제언하였다.

Critical Digital Diplomacy as a Global Challenge: The South Korean Experience

AbstractAn important debate on the impact of digitization on diplomatic practice is currently taking place in most of the world's diplomatic services and beyond. Western perspectives do however dominate writings on the subject and there is scope for importing new theoretical notions into these discussions. This article on digital diplomacy aims to show that South Korea's practices harmonize well with insights from new media theory, and that both inform this debate. New media theory advocates the examination of the new digital environment in which diplomatic interactions are unfolding, and it articulates the politics behind digital technology. We argue that existing, ‘analogue’ diplomacy is not merely superimposed onto technologies now shaping an environment that is facilitating digitally native practices. The debate on digital diplomacy can equally benefit from analysis of the experiences of South Korea. Technological development and innovation impact on the sphere of foreign policy, to the extent that ‘becoming technological’ has turned into an important Korean export asset. We briefly review four ways in which South Korea applied technology to diplomacy. Our analysis concludes with general recommendations for diplomatic practitioners across the world, particularly those who still look at new technologies, including social media, as mere open and freely available ‘services’.

한국 ICT 수출함수의 수출대상국별 비교 분석 -중국, 미국, 일본 비교-

한국 ICT 수출함수의 수출대상국별 비교 분석 -중국, 미국, 일본 비교-

Market Expansions through Experiential Knowledge

Recent economic trends in the global economy motivate firms to develop and expand their export markets. Nonetheless, firms should carefully decide where to export because each economy differs in locales, opportunities, and risks. Despite the importance of the success of export market expansion, previous studies have offered few insights into how to evaluate and select new markets. Depending heavily on the knowledge-based theory of the firm and the internationalization process theory, the author attempted to develop an empirically testable model explaining that international experiential knowledge moderates the effects of country-level factors on the success of export market expansion. The model was tested using a compiled archival dataset drawn from various secondary sources regarding Korean exporters’ market expansion events. The author suggested that the success of export market expansion is affected not only by psychic distance and import country environments but also by international experiential knowledge. This manuscript is concluded with a discussion of important implications for theory and practice by emphasizing the roles of experiential knowledge and the directions of future research in addition to the limitations of the present study.