A Comparative Study on the Effect of Flexibility of International Operation for Korean Electronic Firms: KOSPI vs KOSDAQ

This study examines how a firm’s flexibility of international operation affects its corporate value and performance by dividing the Korean electronics industry into KOSPI as large companies and KOSDAQ as SMEs. South Korea's electronics industry, including global IT companies such as Samsung Electronics, LG Electronics, and Sk Hynix, are major industries in this country. We conduct panel analysis to identify the effects of the proportion of overseas sales in total sales, the number of overseas subsidiaries, and the number of countries where foreign subsidiaries are operating, which are variables that could represent the flexibility of international operation, on Tobin’s Q, which is a proxy for firm value, and ROA and ROS, are proxy of firm’ financial performance, using samples of 30 KOSPI companies and 113 KOSDAQ companies from 2011 to 2016. We not only found the effect of flexibility of international operation in the Korean electronics industry, but also found that the flexibilities of international operation of SMEs are more sensitive than large companies. We also reaffirmed the effect of firm size and R & D intensity among control variables on the firm value and performance. Future research should develop a variety of variables related to flexibility of international operation of MNEs. In addition to the sales-based variables used in this study, we need to find various variables including asset structure, attitudes, and human resources variables.