Korean consumer electronics have, in the past decade, displayed an exceptional attitude towards direct investment in the EU, marking a definite break from the long tradition of strong governmental initiatives previously undertaken in the strategic affairs Korean firms. This study addresses the fundamental question why and under which conditions Korean firms increased their investment so heavily in the EU after 1986 and why they, and not the Korean government, took the initiative in the decision-making process. The author contends that the main reason for the firms' departure from government policy is the belief of the Korean government that national competitiveness, which largely affects the country's standard of living, is determined by the success of local firms in global competition. The government policy of offering tax breaks to Korean "chaebols" is one of the most attractive incentives to expand production abroad rather than at home. Moreover, the government acknowledges that Korean firms are obliged to sell their products in foreign countries because of the small size of the domestic market, which gives rise to the paradoxical situation of barriers being raised to exports, w