This study examines whether foreign direct investment (FDI) helps overcome financial crises in Korea and whether it causes spillover effects. Using panel data on Korean industries and firms from 1981 to 2020, we first confirm that FDI increases during financial crises. In addition, we conduct a firm-level analysis and find that FDI contributes to improving a firm’s productivity and profitability during its periods of financial crisis, indicating that FDI helps domestic firms overcome crises. Furthermore, we find that there is a spillover effect in the post-crisis period, which depends on the characteristics of the financial crisis. Overall, our study highlights the importance of FDI during financial crises and its spillover effects in a transition economy. (JEL F21, F41, G01, G15) 

Keywords: Foreign Direct Investment; Financial Crisis; Spillover Effect, Korea; Transition Economy.