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Speed of FDI expansions and the survival of Korean SMEs: the moderating role of ownership structure

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Abstract

We examine the effects of the speed of FDI expansions (SFEs) on the survival of small and medium-sized enterprises (SMEs) and the moderating role of ownership structure, highlighting how the relationship between SFEs and SME survival varies depending on the owners’ identity and their potentially dissimilar interests. We argue and find in a study of Korean SMEs that the relationship between SFEs and SME survival exhibits an inverted U-shape. Moreover, SME survival peaks at a higher level of SFEs when family ownership is high, while SME survival peaks at a lower level of SFEs when institutional ownership is high.

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Notes

  1. “Speed in this context is generally defined as a relationship between a specific period of time and a company’s completion of certain events and, more specifically, the speed of FDI expansions have been operationalized as the number of FDIs taken by a firm over a specific period of time” (Chang and Rhee 2011, p. 985).

  2. Our study also considers another operationalization for survival, as the number of days from a corporate listing to its delisting from the KOSDAQ stock market. The results, available on request from authors, remain consistent.

  3. Based on Porter’s (1980) terminology, we distinguish corporate strategic orientation as differentiation and cost leadership strategies (Cho and Lee 2018a; Kim and Huh 2015a), where “Differentiation strategy is measured as the corporate selling, general, and administration expenses to total sales plus the R&D expenses to total sales” (Kim and Huh 2015a, p. 400), “Cost leadership strategy is operationalized as corporate asset parsimony plus cost efficiency,” (Kim and Huh 2015a, p. 400) and “Cost efficiency is measured by calculating the cost of goods sold to total sales, and asset parsimony is measured by the sum of capital expenditures and intensity” (Cho and Lee 2018b, p. 151).

  4. We measure CEO international experience as “the following three proxies to gauge the CEO international experience and measure it using a binary variable. First, if the CEO had experience of working abroad. Second, if the CEO had international sales experience. Third, if the CEO had international education” (Hsu et al. 2013, p. 5). We include them both to form a single measure of CEO international experience (Cho and Lee 2018a; Reuber and Fischer 1997).

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  1. Department of Management, Kyungpook National University, 80, Daehak-ro, Buk-Gu, Daegu, South Korea

    Jaeyoung Cho & Jangwoo Lee

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Table A1 Results of probit analysis
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Cho, J., Lee, J. Speed of FDI expansions and the survival of Korean SMEs: the moderating role of ownership structure. Asian Bus Manage 19, 184–212 (2020). https://doi.org/10.1057/s41291-018-0045-7

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