Location Choice of Inward FDIs in Korea: The Case of Japanese FDIs with Unexpected Shock in Home

Abstract

Sometimes, a change in investment motives, caused by an unexpected shock such as national disasters, can make the location pattern of foreign direct investments (FDIs) hosted in a neighboring country. In this paper, the location of new manufacturing FDIs of Japan in Korea from 2008 to 2015 is analyzed. The occurrence of "East Japan earthquake" in 2011 changed the location pattern of Japanese FDIs by industry group. However, general attracting factors, such as easy accessibility to service establishments, continues to be an important location factor, regardless of the industry group. Therefore, to be an effective strategy, the regional economic development strategy of the host country attracting FDIs, should be flexible to the sudden changes in the natural environment of the source country of FDIs, and focus more on the general factors which attract FDIs.