This study aims to explore the globalization process of large ethnocentric firms in an advancing country Korea and the role of domestic manufacturing presence in firms` global operations. Three pieces of different methodological applications are included in this thesis.
First part is a longitudinal comparative case study motivated by an empirical observation that two Korean carmakers, Daewoo and Hyundai, despite some of their structural similarities, have pursued very different globalization strategies. Lessons we were able to derive from such efforts are as follows. Being fierce rivals in the Korean automobile industry has shaped the firms globalization strategies to a great extent: each company took into account its competitive position vis-a-vis the others when making decisions on its global capacity expansion. However, this initial pattern of decisions was altered or reinforced as the companies experienced challenges in the global market, which were varying significantly region by region. This research also suggests a caveat about potential pitfalls of global capacity expansion with an unsustainable speed. The lessons as well as managerial implications derived from this research can provide top managers, especially in global companies from advancing countries, with valuable insights when formulating their global capacity expansion strategies.
Second part is a simulation analysis extending prior case study. After examining prior studies about internationalization and internationalization process theory, a dynamic globalization process model could be developed. Johanson & Vahlne(1977)`s internationalization process model is extended by including de-internationalization concept, decision maker`s propensity, environmental need and adaptation, etc. Based on this dynamic globalization process model, a system dynamics simulation model could be made. This model can replicate similar patterns of past 20 years` Korean automobile industry. Some findings can be obtained by varying debt constraint and initial domestic capacity. First, the follower firm cannot catch up with the market leader in the domestic market without using some level of external resource. Second, as strong as the initial domestic competitive position, the follower firm can easily overtake the market leader. And the foreign capacity ratio at catch up period is more higher as the initial domestic competitive position is weak.
Third part is a survey analysis investigating an important issue in globalization, the relationship between production capacity of a global company`s domestic manufacturing presence and its performance, where 1 minus the relative production capacity size of domestic manufacturing presence is regarded as its globalization level. Analyzing the field data on 42 Korean companies engaged in global operations, I reached preliminary conclusions. First, the optimal level of globalization represented by its relative production capacity does not exist. This lack of significance subsides when I associate the globalization level with global coordination between the headquarters and its subsidiary. Global coordination turns out to be a significant factor, either direct or moderating in relation to the globalization level, in determining the subsidiary`s performance.
Finally, some strategic implications of managing globalization process and domestic manufacturing presence are suggested.