The determinants of South Korean outward FDI in Russia: a partial least square (PLS) analysis

Abstract

The significance of economic cooperation between South Korea and Russia is growing due to the new foreign policies of the two countries: the New Northern policy of South Korea, and the Pivot to East of Russia. Thereby, in this study, we investigated the determinants of South Korean outward FDI in Russia based on the time-series data for the period 1993-2017 to draw policy implications. To overcome the issues of multicollinearity and the small number of observations in an ordinary least square (OLS) function, we employed a partial least square (PLS). The result of PLS analysis indicated that GDP (+) and inflation (-) are statistically significant out of the 7 explanatory variables in our model. But, as the coefficient of inflation was too small, it is also hard to be defined as a significant factor. While, the difference of GDP per capita, freedom index, the nominal exchange rate, natural resource, and trade openness are determined as statistically insignificant. From the result, we found that South Korean outward FDI in Russia is predominantly purposed with market-seeking.