Advanced Search
MyIDEAS: Login to save this paper or follow this series

How Decisions on Investing in Russia are made by German Firms?

Contents:

Author Info

  • Kotov, Denis

Abstract

In the paper we have clarified how the German multinational (MNE) and small and medium sized enterprises (SME) appraise and perform their foreign direct investments in Russia. Our analysis was supported by a survey of German firms running their business in Russia which was made in the period from April to July 2008. In the survey we also asked about the problems and barriers which German companies face when they invest in Russia. Finally, we have presented how the ‘typical’ investment decision process is run in German firms that are going to Russia. German firms start up their operations in Russia by establishing a subsidiary (~80%). All information related to the investment decision is collected mainly internally (~80%). 66% of firms appraise foreign investment using the Discounted Cash Flow technique which incorporates principally macroeconomic factors, such as the expected inflation rate (~70%) and the GDP growth (86%). Institutional factors describing a country’s level of corruption, the quality of governance or economic policy and economic structure risks are generally ignored. One sixth of firms use these indicators only. The expansion is often financed by the parent company (43%) or by German home banks and their Russian subsidiaries. The main obstacles while investing are the weak and changing legislation, frequent tax inspections, complex tax system and corruption. Undeveloped transport infrastructure belongs to the significant barrier as well. However, such factors as language, domestic competition or limited access to the strategic important industries are considered as minor hurdles. Besides this, profit repatriation restrictions are assessed as a moderate problem. In two thirds of cases the expected return on investment has been achieved or even beaten. The key reasons for the failure of investment are overoptimistic market expectations, unsatisfactory qualifications of the domestic personnel, unreliability of business partners and non-accurate market research.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://mpra.ub.uni-muenchen.de/16373/
File Function: original version
Download Restriction: no

Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 16373.

as in new window
Length:
Date of creation: Apr 2009
Date of revision:
Handle: RePEc:pra:mprapa:16373

Contact details of provider:
Postal: Schackstr. 4, D-80539 Munich, Germany
Phone: +49-(0)89-2180-2219
Fax: +49-(0)89-2180-3900
Web page: http://mpra.ub.uni-muenchen.de
More information through EDIRC

Related research

Keywords: Investment Climate; FDI; Germany; Russia; DCF; Investment Valuation;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Benjamin Gomes-Casseres, 1990. "Firm Ownership Preferences and Host Government Restrictions: An Integrated Approach," Journal of International Business Studies, Palgrave Macmillan, vol. 21(1), pages 1-22, March.
  2. Kotov, Denis, 2008. "How Changing Investment Climate Impacts on the Foreign Investors Investment Decision: Evidence from FDI in Germany," MPRA Paper 8777, University Library of Munich, Germany.
  3. Hakkala, Katariina & Norbäck, Pehr-Johan & Svaleryd, Helena, 2005. "Asymmetric Effects of Corruption on FDI: Evidence from Swedish Multinational Firms," Working Paper Series, Research Institute of Industrial Economics 641, Research Institute of Industrial Economics, revised 20 Aug 2007.
  4. Sanjeev Agarwal & Sridhar N Ramaswami, 1992. "Choice of Foreign Market Entry Mode: Impact of Ownership, Location and Internationalization Factors," Journal of International Business Studies, Palgrave Macmillan, vol. 23(1), pages 1-27, March.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Csaba Weiner, 2011. "Foreign Direct Investments in Russia and the Hungarian-Based Investors," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, Bulgarian Academy of Sciences - Economic Research Institute, issue 2, pages 104-115.
  2. Kotov, Denis, 2013. "Behavioral Biases and Corporate Decision Making on Investing Abroad," MPRA Paper 49858, University Library of Munich, Germany.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:16373. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.