FDI motives and the use of tax havens: Evidence from South Korea

Nigel Driffield, Chris Jones, Jaeyeon Kim, Yama Temouri

Research output: Contribution to journalArticlepeer-review


Despite the recent attention in the media and focus in the academic literature on tax havens and tax mitigation
strategies, we know very little about how the use of tax havens relates to a firm’s internationalisation strategy. In
this paper, we develop a conceptual model that explains how FDI into tax havens relates to the standard FDI
motives identified in the literature. We subsequently use a novel dataset that allows us to empirically investigate
how these motives impact upon tax haven FDI in the South Korean context, which has experienced very rapid
economic development over the last few decades and is now considered an advanced economy. We find that tax
haven FDI is strongly linked to market-seeking and efficiency-seeking FDI, whereas its link with resourcesseeking FDI is only found with respect to the most secretive tax haven locations. Furthermore, we find no
relationship between technology seeking FDI and tax haven use. We argue that as tax haven use increases over
time, the economic proceeds of outward FDI leak out and remain offshore.
Original languageEnglish
Pages (from-to)644-662
Number of pages19
JournalJournal of Business Research
Early online date12 Jul 2021
Publication statusPublished - Oct 2021


  • FDI Motives
  • Outward FDI
  • Profit shifting
  • South Korea
  • Tax Havens


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