The purpose of this study is to observe the activities of Korean corporations in China, analyzing their impact on the expanded economic cooperation with China as well as the policy implications.
In order to expand economic cooperation, foreign direct investment should progress beyond initial investment to entrepreneurial operational management. According to a recent report by the Bank of Korea, in 2001, actual investment performance showed a deficit because the cost for liquidation was higher than the investment cost for the same period. Successful corporate management is the most important factor in stabilizing direct investment and expanding economic cooperation.
When determining whether or not a Korean company has stable business operations in China, a localization index is used. The local index is able to examine several factors, including the degree to which a resident employee has adapted to the local culture, localization of a business strategy, and level of social integration of the company in the culture.
When resident employees are selected, companies tend to focus more on management or technical skills rather than emphasizing skills on adapting to new local cultures. Also, they receive very little training prior to their departure. Since employees in overseas do not adapt to the local culture easily, it has become an obstacle for effectively managing local employees. Although, local Chinese employees tend to evaluate favorably towards Korean companies on their contribution to local society, however it is examined that Korean companies have a habit of excluding the local culture and refrain from transferring technologies to China. This shows that Korean businesses do not make an effort to localize at the social level.
The study results that it will be more effective if businesses could establish strategies that are more focused on localization based on its size or corporate structure. For instance, companies which tend to focus in the domestic market should expand its market to overseas and strengthen its role of decision making, while companies that focus on export shall refrain from expanding its overseas branch and strengthen the role of the head office. Also, conglomerates should increase number of middle manager from the local area and try to understand the local culture through trainings, and small and medium sized companies should increase number of local staffs in managerial level with expertise and implement a management system where employees are compensated based on their skills.
These changes are necessary for companies since China has become a competitive place to invest, and in order to do so Korean companies should try to localize and expand its market in China more.
21세기 동북아 경제협력에 관한 연구(Northeast Asian economic cooperation of the 21st century)
중국에 진출한 한국법인들의 현지화를 통한 경영성과 제고를 중심으로(Focusing on improving business operations by localizing Korean businesses in China)
|Subject Country||China(Asia and Pacific)
South Korea(Asia and Pacific)
|Subject||Economy < Economic Administration|
|Holding||한국개발연구원; KDI 국제정책대학원|