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Jeong Woo Lee

Research student

Management Department
Birkbeck, University of London
Malet Street
London WC1E 7HX

e-mail: jw.lee@mbs.bbk.ac.uk

Abstract: description of PhD project

Multinational Enterprises and Local Innovation Capability Development in the Korean Digital Content Industry

Over the last two decades, international trade has grown faster than the global economy and governments across the world, both in developing and developed countries, are trying to attract multinational corporations to locate in their country. The role of MNCs and potential of foreign direct investment to contribute to the welfare of host economies has been of great interest to both academics and policy makers. As a matter of fact, FDI has now become the most important source of external financing for many countries (UNCTAD, 2000).

It is recognized that MNCs’ subsidiaries have become increasingly significant contributors to a host nation’s competitiveness by providing product, process technology, technical and managerial skills. These skills are significant in enhancing the skills of a nation’s workforce and the innovative capability housed within the nation. The experience/skills that individual workers gain on the job collectively contribute to national innovation systems (Freeman, 1995; Mowery and Oxley, 1995). Therefore, MNCs’ subsidiaries can supply some resources that contribute to the competitive advantage of their host economy, and interactions between R&D units of MNCs’ subsidiaries and local partner organizations can influence innovation dynamics in the host country. By enhancing its human resources skills and innovative capabilities, a host economy may find that it attracts more foreign investment inflow, which will enhance the host country’s resources to an even greater extent.

An important element that should be considered is that each country’s unique path is determined by 1) its resource structure 2) its market size 3) its strategy for economic development and 4) the role of government in the organization of economic activity (Narula, 1996). This suggests that it is important to consider the experiences of different countries when considering FDI-led development. Korean was hugely influenced by the economic nationalism that intended to build a strong economy based on domestic ownership and inward FDI is a relatively new phenomenon in Korean economic system. However, since the financial crisis in 1997, the economic benefits Korea has gained from inward FDI have been great, as high value-added sectors like R&D has accounted for an increasing share of investment. It is also anticipated that, given the fact that almost all of Korea’s target industries are IT or related fields, the IT industry is expected to provide attractive business opportunities to both Korean and foreign investors.

To the best of my knowledge, this study is the first to investigate the relationships between MNCs and local firms which result in sustainable indigenous technological development in Korean industry. Furthermore, it provides useful insights into the spillovers and relationship phenomenon that exist between multinational firms and Korea’s advanced IT industry. In contrast to many developing countries, where the benefits of FDI are not always forthcoming due to large technology gaps and dominant foreign presence (Kokko, 1994), Korea seems to have much to gain from FDI, because of the complementarities between local and foreign resources. Therefore, this study offers a vast wealth of insights of inter-firm linkages and useful perspectives on the extent of involvement of multinational firms in local industry relative to academics and policy makers.

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