This paper conducts empirical analysis of a pattern of inward and outward
foreign direct investment(FDI) of manufacturing firms in the perspective of the
internalization theory. Using data on the Survey of Business Activities provided
by the Statistics Korea, we use bivariate probit model to investigate correlation
between foreign ownership and foreign affiliates. Our results show that there
is substitutability between the two choices. The results suggest that the
purpose of investment of foreign ownership to Korean manufacturing industry
might not be to expand value chain, but to integrate specialized production
stage. Otherwise, domestic firms without foreign ownership want to make
foreign affiliate in order to join global value chain. The contribution of this
paper is that we explain the pattern of inward and outward FDI in Korean
manufacturing industry through the perspective of global value chain by using
firm-level data.