U.S. Firm Specific Factors and Their Decision to Invest in the Korean Economy

This paper contributes to the academic literature in two fundamental ways.  First, it creates a unique database of 85 U.S. firms that have had significant involvement in the Korean economy.    It is difficult to obtain information on the U.S. firms that engage in Foreign Direct Investment  (FDI) in Korea.  The authors generated this database by using the American Chamber of Commerce in Korea (AMCHAM) Membership directory.  AMCHAM was established in 1953 to encourage American businesses to invest in Korea.   The database was created by including from the directory any U.S. firms that have at least 50 employees in Korea.  The CEO of AMCHAM estimates that 90 percent of the U.S. firms that are doing business in Korea are included in the directory, and almost all are major firms.  The second contribution is that this paper then uses this database to construct a profile of these firms to analyze the commonality that lead to U.S. firms to invest in Korea.  The results suggest that the firms in the study that are more likely to invest in Korea are related to a Specific Industry Code (SIC)  and are constrained to a particular global strategy.  Additionally, these firms are found to be significantly more concentrated on the New York Stock Exchange (NYSE).   The firms also are much more inclined to establish wholly owned subsidiaries as opposed to joint ventures. The firms in the database were then matched to other U.S firms without a significant exposure to global operations in Southeast Asia.  A logit model was then used to identify unique firm specific characteristics.