The Effects of Korean Firm-Specific Advantages on Foreign Subsidiary Performance: Moderating Effects of Host-location and Korean Chaebols

Korean MNCs overcame the 1997 Asian financial crisis through restructuring, and have continuously improved with an increase in Korea’s outward FDI scale, which has persisted even after the 2008 sub-prime mortgage crisis. Past studies have been mostly based on periods before the 1997 Asian financial crisis, and research lack in studying Korean MNCs’ firm-specific advantages (FSA) when operating overseas. This study researches Korean MNCs’ firm-specific advantages’ effect ―technological knowhow, marketing knowhow, international experience―on foreign subsidiary performance and the moderating effects of host location(DC/LDC) and Chaebol affiliation, by using firm-level panel data from 2000 to 2006, which is the period that Korean FDI started to increase. The results show that technological knowhow has a positive effect on subsidiary performance, while marketing knowhow had a negative effect. Host country location and Chaebol affiliation both exhibited moderating effects. On the other hand, international experience did not have a significant effect on subsidiary performance, but additional research showed that it has a U-shaped relationship with foreign subsidiary performance.