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Ownership, Capital or Outsourcing: What Drives German Investment to Eastern Europe?

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Author Info
Lorentowicz, Andzelika
Marin, Dalia
Raubold, Alexander

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Abstract

The Paper takes a first look at the host and home country effects of German foreign direct investment (FDI) in Eastern Europe based on new survey data of 1050 investment projects in Eastern Europe by 420 German multinationals during the 1990s. We find that German investors transfer a substantial amount of financial capital to Eastern Europe. Furthermore, the most dynamic and innovative segment of the German economy invests in the East which explains why single owned firms dominate as the form of control. We also find strong evidence for vertical FDI suggesting that German corporations are outsourcing a substantial share of their production to Eastern European affiliates to exploit lower wages in the East.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3515.

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Date of creation: Sep 2002
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Handle: RePEc:cpr:ceprdp:3515

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Related research
Keywords: capital flows; corporate governance; Eastern enlargement; globalization; vertical vs horizontal FDI;

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Find related papers by JEL classification:
F15 - International Economics - - Trade - - - Economic Integration
F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Capital and Ownership Structure
G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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  1. Dalia Marin, 2004. "‘A Nation of Poets and Thinkers’ - Less So with Eastern Enlargement? Austria and Germany," Discussion Papers 77, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich. [Downloadable!]
    Other versions:
  2. Dalia Marin, 2005. "A New International Division of Labor in Europe: Outsourcing and Offshoring to Eastern Europe," Discussion Papers 80, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich. [Downloadable!]
    Other versions:
  3. Marin, Dalia, 2005. "A New International Division of Labor in Europe: Offshoring and Outsourcing to Eastern Europe," Discussion Papers in Economics 714, University of Munich, Department of Economics. [Downloadable!]
  4. Andzelika Lorentowicz & Dalia Marin & Alexander Raubold, 2005. "Is Human Capital Losing From Outsourcing? Evidence for Austria and Poland," Discussion Papers 76, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich. [Downloadable!]
    Other versions:
  5. Audra I.Mockaitis & Erika Vaiginiene & Vincent Giedraitis, 2005. "The Internationalization Efforts of Lithuanian Manufacturing Firms - Strategy of Luck?," Industrial Organization 0502001, EconWPA. [Downloadable!]
  6. Marin, Dalia & Schnitzer, Monika, 2006. "When is FDI a Capital Flow?," CEPR Discussion Papers 5755, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  7. Diemo Dietrich, 2004. "Financing FDI into Developing Economies and the International Transmission of Business Cycle Fluctuations," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 140(IV), pages 449-481, December. [Downloadable!]
  8. Audra I.Mockaitis & Erika Vaiginene & Vincent Giedraitis, 2005. "The Internationalization Efforts Of Lithuanian Manufacturing Firms - Strategy Or Luck?," Industrial Organization 0501007, EconWPA. [Downloadable!]
  9. Petr Kral, 2004. "Identification and Measurement of Relationships Concerning Inflow of FDI: The Case of the Czech Republic," Working Papers 2004/05, Czech National Bank, Research Department. [Downloadable!]
  10. Michael Hübler, 2007. "A Simple Model of Outsourcing with Cournot Competition," Kiel Working Papers 1320, Kiel Institute for the World Economy. [Downloadable!]
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