Domestic industrialization under colonization: evidence from Korea, 1932–1940[Do domestic firms benefit from direct foreign investment? Evidence from Venezuela]

This paper examines whether the influx of Japanese establishments in colonial Korea during the 1930s suppressed the entry of Korean establishments. We construct new subsector–county-level panel data to exploit variations across counties within subsectors. We find that Korean entry rates were higher in counties with a higher presence of Japanese establishments. However, the spillover effects do vary across subsectors, and we find suggestive evidence of negative impacts of Japanese presence in subsectors with more large-scaled establishments. Taken together, Japanese establishments did seem to raise entry barriers in some subsectors but also functioned as a catalyst for Korean entry in other subsectors.