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The Determinants of Korean Foreign Direct Investment in the United States Wholesale Trade

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  • Yoong Deok Jeon

    (Taegu University)

Abstract

Using the principal-agent problem, we develop a simple transaction cost model to explain why some Korean manufacturers choose to set up their own sales subsidiaries among various kinds of distribution channels in the United States. The model suggests that agent opportunism, monitoring costs, and the expected costs of providing services explain the shift between alternative institutional modes. Furthermore, the existence of contracting difficulties between Korean manufacturers and U.S. independent distributors proved to be significant in the empirical work.

Suggested Citation

  • Yoong Deok Jeon, 1990. "The Determinants of Korean Foreign Direct Investment in the United States Wholesale Trade," Korean Economic Review, Korean Economic Association, vol. 6(2), pages 129-140.
    • Handle: RePEc:kea:keappr:ker-199012-6-2-08
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