Chae, Sun Hee; (1999) The Transfer of Korean Passenger Car Production to East Central Europe: The Case of Direct Foreign Investment by Daewoo Motor. Doctoral thesis (Ph.D), UCL (University College London).

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Abstract

Passenger car companies in developed countries, such as Germany, France, Italy, the United States and Japan, have been investing in overseas plants for local production for a very long time. However, until recently there has been no significant indigenous car manufacturer to become a global player from newly industrialised countries (NICs) or developing countries. In contrast to major players in the world market, current car producers in the NICs and developing countries locate their manufacturing plants at home, seeking to export their products rather than investing in overseas production facilities. However, car manufacturers, particularly in the Czech Republic, Malaysia and South Korea, are currently preparing to go one step further with direct investments in car manufacturing abroad. Among them, South Korean car manufacturers have made the most significant progress in setting up production facilities in foreign countries. Daewoo Motor is one of the leading investors among car manufacturers in South Korea, with direct investments concentrated in developing and East Central European countries2. This research aims to understand the reasons for Daewoo Motor's direct investment in car manufacturing in Poland and Romania, and investigates the company's comparative advantages and global strategy by identifying the pattern of its global operations. Two sets of research hypotheses have been tested in this research study. The first is that Daewoo Motor was motivated by market access in Poland and Romania. The second proposes that the company aims to access Western European markets. That is, with the prospect of future integration of East Central Europe into the overall European car market, those countries offer attractive investment opportunities and a justification for Daewoo Motor to change its export strategies toward the whole European market. By setting up production facilities in East Central European countries, Daewoo Motor can not only obtain access to potential markets in the region, but can also avoid regional trade barriers in European Union member countries in the future. Through the field survey, the dissertation finds that initially the main reason for Daewoo Motor's investments in car manufacturing in Poland and Romania is a necessary strategy to secure a market for future increases in production. However, the responses collected from interviews during the field survey were different from the reality Daewoo Motor is facing. Governments' support in Poland and Romania, particularly through investment incentives and import controls, seems to motivate the company's investment in these countries, implying a typical crony capitalism. However, the global strategy of Daewoo Motor constitutes a new chapter in the history of the South Korean car industry and in the world motor industry, which has been dominated by car producers in developed countries for almost a century.

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