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Mothers and Daughters: Heterogeneity of German Direct Investments in the Czech Republic

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  • Daniel Munich
  • Martin Srholec
  • Michael Moritz
  • Johannes Schaffler

Abstract

Much has been written on the distinction between vertical and horizontal foreign direct investment. However, most of the empirical literature relies on indirect and aggregated measures only. The aim of this paper is to help fill this gap by examining the differences between German affiliates in the Czech Republic and their mother companies in Germany on the basis of direct evidence on factor requirements. Using a cluster analysis on firm-level data from the unique ReLoc survey, we identify four main groups of firms that partition the sample by broad sectoral lines and by technological, educational and skill intensity of their operations within each of them. More detailed analysis of the clustering reveals that the vertical model dominates in manufacturing, while the horizontal model of investment prevails in the service sector.

Suggested Citation

  • Daniel Munich & Martin Srholec & Michael Moritz & Johannes Schaffler, 2012. "Mothers and Daughters: Heterogeneity of German Direct Investments in the Czech Republic," CERGE-EI Working Papers wp467, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    • Handle: RePEc:cer:papers:wp467
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    Cited by:

    1. Schäffler, Johannes & Moritz, Michael, 2018. "German FDI in the Czech Republic - Employment effects in the home country," IAB-Discussion Paper 201806, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    2. Falilou Fall & Christine Lewis, 2017. "Fostering Productivity for Income Convergence in the Czech Republic," OECD Economics Department Working Papers 1362, OECD Publishing.
    3. Michael Moritz & Veronika Hecht & Patricia Noska & Johannes Schaffler, 2020. "Types of FDI and Determinants of Affiliate Size: the Classification Makes the Difference," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 70(4), pages 312-331, October.
    4. Schäffler, Johannes & Hecht, Veronika & Moritz, Michael, 2014. "Regional determinants of German FDI in the Czech Republic : evidence from a gravity model approach," IAB-Discussion Paper 201403, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    5. Johannes Schäffler & Veronika Hecht & Michael Moritz, 2017. "Regional determinants of German FDI in the Czech Republic: new evidence on the role of border regions," Regional Studies, Taylor & Francis Journals, vol. 51(9), pages 1399-1411, September.
    6. Schäffler, Johannes, 2016. "German Direct Investments in the Czech Republic – Employment Effects on German Multinational Enterprises," VfS Annual Conference 2016 (Augsburg): Demographic Change 145526, Verein für Socialpolitik / German Economic Association.
    7. Lutz Bellmann, 2014. "Kontinuität und Veränderung des IAB-Betriebspanels [The development of the IAB establishment panel]," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 47(1), pages 5-26, March.
    8. Hannah Illing, 2023. "Crossing Borders: Labor Market Effects of European Integration," ECONtribute Discussion Papers Series 221, University of Bonn and University of Cologne, Germany.
    9. Illing, Hannah, 2023. "Crossing Borders: Labor Market Effects of European Integration," IZA Discussion Papers 15930, Institute of Labor Economics (IZA).

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    More about this item

    Keywords

    multinational enterprise; foreign affiliate; vertical investment; cluster analysis; Germany; Czech Republic;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development

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