Technology Acquisition in Korea's Automobile Industry

The automobile industry developed very rapidly in Korea from the mid-1970s onwards. In the early stage of its development, it used both foreign direct investment (FDI) inflows and technology licensing contracts to utilize advanced foreign technologies. The government mainly preferred technology licensing to FDI inflows to gain access to production technologies. A specific case of FDI is displayed in the joint venture between General Motors and Daewoo Motors. Although there were several improvements and assistances provided to the latter, its performance was relatively unsatisfactory. In contrast, Hyundai Motors relied on technology licensing, which turned out to be successful. Korea's experience of technology acquisition in the automobile industry shows that for a developing country considering development of its own automobile industry, it would be beneficial to utilize technology licensing rather than FDI inflows.