| MNC's divestment is as common as its investment. What cause the divestment? And what is the basis of the determinants of different divestment modes? It is not only an important theoretical and empirical issue, but also is a very important management issue for enterprises. This research, based on organizational ecology theory and strategy theory, analyzes the determinants of divestment of Korean enterprises in China and the mode of divestment. The analysis results are as below. Firstly, according to the explanation based on organizational ecology theory to the reason of enterprise death, we propose 9 hypotheses. (1) There is a negative correlation between divestment of the sample enterprises and their investment length in China. (2) There is a positive correlation between divestment of the sample enterprises and their investment length in China. (3)There is a negative correlation between divestment of the sample enterprises and their start-up sizes. (4) There is a negative correlation between divestment of the sample enterprises and density of other foreign enterprises in other industries. (5) There is a negative correlation between divestment of the sample enterprises and density of local enterprises in other industries. (6) There is a negative correlation between divestment of the sample enterprises and density of Korean enterprises in other industries. (7) There is a positive correlation between divestment of the sample enterprises and density of other foreign enterprises from the same industry. (8) There is a positive correlation between divestment of the sample enterprises and density of local enterprises from the same industry. (9) There is a positive correlation between divestment of the sample enterprises and density of Korean enterprises from the same industry.In order to testify the above hypotheses, we use the following variables and definitions. The divestment or not of sample enterprises is dependent variable, institutional and ecologic factors are independent variables. We use enterprise age and enterprise size as institutional variables, and use enterprise density as ecological variable. The reasons we introduce these three variables are mainly the following. (1) Enterprise age is used to inspect whether Korean enterprise death depends on enterprise age, namely, the liability of newness, adolescence and obsolescence. (2) Enterprise size is used to inspect the existence of size dependence for the death of Korean enterprises. (3) Enterprise density is used to inspect whether Korean enterprise death depends on enterprise density. Considering the difference of complementariness and competition between sample enterprises and other enterprises in the same industry or in other industries, enterprise density is divided into 6 variables in the analysis model: (1) Complementariness between sample enterprises and other foreign enterprises in other industries, (2) Competition between sample enterprises and other foreign enterprises in the same industry, (3) Complementariness between sample enterprises and local enterprises in other industries, (4) Competition between sample enterprises and local enterprises in the same industry, (5) Complementariness between sample enterprises and Korean enterprises in other industries, (6) Competition between sample enterprises and Korean enterprises in the same industryThen we use Binary Logit Model to testify the above hypotheses, the test results are as following:First, as to the hypothesis of age dependence, hypothesis 1 hasn't been testified, hypothesis 2 has been testified, which means that, with increase of enterprise age, the possibility of divestment increases accordingly. This result shows that sample enterprises have obvious liability of obsolescence. The main reason is structural inertia, the existence of structural inertia cause enterprises can't respond to the change of business environment in China effectively. From Chinese perspective, these Korean enterprises in China are all new enterprises. However, from the perspective of Korea, there are just subsidiaries which fulfil the production function for parent companies. These subsidiaries mainly adopt the business pattern of"both-ends-abroad"(import raw materials and semi-finished products from Korea, and sell products to Korea or the other countries), the purchasing of raw materials, product sale and even personnel arrangement are decided by their parent companies. On such business patter, local subsidiaries are lack of the right to operate independently, so they have no incentive to operate by themselves.Second, hypothesis 3 which is the hypothesis of size dependence hasn't been testified, which means that there is no significant relationship between start-up size and divestment. Start-up size, the initial resource, can help enterprise to overcome the liability of adolescence and reduce the risk of death. However, if enterprises don't pay attention to exploit local advantageous resources continuously and store knowledge and experience of the new market, then they are hard to avoid divestment. Korean enterprises overcome the liability of newness successfully by utilizing initial resource, however, they do not succeed in exploiting local new resources, learning and storing new knowledge and experience to manage the risk of changing environment. This is the main reason of Korean divestment.Third, the hypotheses of density dependence, hypothesis 4, hypothesis 5, hypothesis 7, hypothesis 8, all haven't been testified. This means that, there is no cluster effect or direct competition between sample enterprises and both other foreign enterprises and local enterprises in the same industry or in other industries. There are two possible reasons: One is the difference of regional distribution of investment between Korean enterprises and other foreign enterprises in China. Korea enterprises mostly invest in Shandong Peninsula and Beijing-Tianjin areas. However, foreign enterprises from Taiwan, Hongkong and Japan mostly invest in Yangtse River Delta and Pearl River Delta. The other is the business pattern of"both-ends-abroad"which most Korean enterprises adopt. In this business pattern, there is no direct complementariness or competition between Korean enterprises and both other foreign enterprises and local enterprises. In addition, for the hypotheses of density dependence between Korean enterprises, hypothesis 6 has been testified, but hypothesis 9 hasn't. This shows that, the agglomeration of Korean enterprises, both in the same industry and from different industries, has positive influence on the survival of sample enterprises. The reason is that, the external economics between sample enterprises and Korean enterprises from the other industries come from the stability of transaction relation and decrease of transaction cost; the external economics between sample enterprises and Korean enterprises in the same industries come from the sharing of product technology, managerial experience, related information and expert knowledge.Fourth, regarding the degree of influence of each variable on divestment, the complementariness between sample enterprises and Korean enterprises in other industries is the most favorable factor to enterprise survivability; following is the competition between sample enterprises and Korean enterprises in the same industry. On contrary, the liability of obsolescence caused by structural inertia is the most unfavorable factor. Secondly, we establish a two-dimension analysis model of'environment & resource'based on strategy theory. The model supplies a favorable point of recognition for this research to study the determinants of the mode selection of Korean enterprises from the two dimensions of environment and resource.In the model of'environment & resource', we divide the combination of environment and resource into four according to the influence of different restrain degrees of environment and resources on strategy selection: (1) advantageous environment, adequate resources; (2) advantageous environment, inadequate resources; (3) disadvantageous environment, inadequate resources; (4) disadvantageous environment, adequate resources. As to the first combination, enterprise will not divest, but may expand the existing business scale. This situation is out of this research, we will not discuss. As to the second combination, enterprise will exit non-core business which is lack of competitive. As to the third combination, the enterprise will abandon the business and completely divest from host country. And as to the fourth combination, enterprise will shrink its business scale. As to the latter three divestment strategy, we propose three hypotheses. (1) If enterprise abandons all its business and totally exists from host country, then the reason of divestment is the constraints of both environment and resource. (2) If enterprise shrinks its business scale in host country, then the reason of divestment is the constraint of environment. (3) If enterprise exits its non-core business, the reason of divestment is the constraint of resource.Based on the data of enterprise questionnaire, we testify these three hypotheses. The result is that, both hypothesis 1 and hypothesis 2 have been testified, hypothesis 3 hasn't been testified just because of the lack of such case. Here, an important question that is unavoidable is that, why enterprise in the same environment choose different divestment mode. From the characters of the enterprises, we can see that, enterprises which adopt shrink strategy possess high-level internal resources. Their basis of advantage is advanced technology and good product quality, not just low cost. Especially, this kind of enterprise view Chinese domestic market as their target market, so the factors, such as the cancelling of favorable tax policy and the changing of exchange rate, do not affect their divestment actually. From the cases of total exit, we can see that, for pure process-trade enterprises, they possess inferior resources, so they adopt the business pattern of"both-ends-abroad", their motivation for investment in China is obviously cost-oriented, and their basis of competition is cheap labor and favorable policy. For market-oriented enterprises, as Chinese market is their target market, they are not sensitive to the change of environmental factors, such as export rebate policy, RMB appreciation. In contrary, factors, such as the demand of Chinese market, relative market, and product positioning, are the determinants of their divestment.To sum up, the change of environmental is an important factor that affects Korean enterprises'decision on divestment, but environmental change doesn't always cause enterprise divestment. Enterprises with different resource structure adopt very different divestment modes under the same environment. Whether enterprise divests and what mode enterprise adopts to divest depend on the degree of matching of environment and resource, and the degree of matching depends on the advantageous resource structure of the enterprise.The above analysis and conclusion is very important for the management of the business of Korean enterprises in China. First, exploiting new resource and learning knowledge is crucial for enterprise to enhance survivability. The fact that the possibility of Korean divestment increases with the increase of age shows that the positive influence of initial resource on the enterprise survival has reached the maximum. In another word, the initial resource that Korean enterprises possess can't resist all the negative impacts caused by the change of external environment. Korean divestment relates to the adjustment of policy and increase of labor cost in China, but the most important reason is the fragility of resource structure. If Korean enterprises want to remain sustainable survivability, they must enhance learning ability continuously, emphasize on exploiting and make full use of local resources, store new market knowledge, for these, the first and most important thing is overcoming structural inertia.Second, the resource structure of parent company is also very important for subsidiary in China to enhance its survivability. Many studies prove that the liability of smallness is universal. Initial resource can help enterprise to overcome liability of newness and supply a period of honeymoon for new enterprise, and the length of honeymoon depends on the resource grade of parent company. The average age of Korean enterprise in China is obviously younger than Japanese enterprise, which shows the resource advantage of Korean enterprise is in a low level. Initial resource is crucial for the enhancement of enterprise survivability. However, besides start-up size, the factors of product, technology, management and marketing should also be considered for successful oversea business. Therefore, exploiting new business, optimizing product structure, increasing technology content and added value of product are of great significance for enterprise to enhance survivability and expand space for continuous growth.Third, Korean enterprises'selection of investment area should pay much attention to the correlation and external economics with enterprises in the same industry and from other industries. The interaction between enterprises in the same industry usually accelerates enterprise death, however, the interaction between enterprises from different industries usually benefits on enterprise survival. Most Korean enterprises adopt the business pattern of"both-ends-abroad", they are lack of correlation with other foreign enterprises and local enterprises in the same industry or in other industries, so they can't enjoy external economics. Besides the correlation with Korean enterprises, Korean enterprises'selection of investment area should also consider their correlation with foreign enterprises and local enterprises, and enhance localization ability of the production of added value. This is crucial for the enhancement of Korean enterprise survivability.Fourth, enterprises should emphasize the feasibility study before investment, avoid blind investment. Many Korean enterprise divestments are caused by the lack of feasibility study. Using joint venture for example, Korean enterprise's knowledge about asset and operation ability of joint partner is limit to written materials before investment, and knowledge about partner's actual fulfillment ability, whether the operational objectives of both sides are different, and whether resources of both sides can originate synergistic effect after joint venture and so on, many important questions haven't been studied and proved before the joint venture. In addition, Korean enterprises assess the demand of Chinese market over-optimistically, and are lack of considering the possible risks in the market. Especially, a lot of enterprises depend on their partners purely for the sale in Chinese market, which increases the possibility of divestment.
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