Places for Korean firms in China: looking for a viable international division of labor in 1990-2010

In the past decade, increasing economic integration with China has offered vast business opportunities to Korean firms. Given the changing industry map in East Asia, Korean firms have been seeking a new international division of labor with Chinese firms via foreign direct investment. During the last two decades, Korean firms in China attempted to create business models that implemented either a full set of business activities (full model) or a partial set of business activities (partial model). We have found that the competitiveness of Korean firms in China experienced drastic changes, which changed the viability of specific models, namely the partial model, for Korean business in China. Our cases have indicated that both full and partial models evolved responding to environmental changes in the host market. The central reason for such changes is that as Chinese firms accomplished a technological catch-up, they began to replace the roles of Korean firms in China at a rapid rate, which obsolesced the bargaining power of Korean firms in China in their relations with their Chinese partners. Our study implies that Korean firms going to China, when seeking for a viable business model, should deliberately consider the possibility of Chinese firms' catching-up with Korean firms within the industries.