Are German firms turning their backs on domestic locations? - The foreign direct investment of German enterprises

Foreign direct investments of German enterprises and their effects on the domestic labour market have attracted the attention of the general public and politicians. In light of the superficial assessments in the public discourse, this article provides a descriptive summary of major changes over the past decade and the current state of FDI research in Germany, based on the DIREK database (direct investment statistics) of the Bundesbank. The conquest of markets in Central and Eastern European (CEE) countries was undertaken presumably with the main goal of vertically structuring value added beyond borders and within multinational companies. Direct investments of German firms in the transatlantic industrial nations show clear differences to investments in CEE countries. In the industrial countries of North America, the high capital-employee relationship in subsidiaries of German firms suggests that the key motive in these countries, in addition to overcoming export barriers, is proximity to these large markets. However, on the basis of this descriptive presentation alone, neither the motives of German enterprises in their site decisions nor their labour market effects can be determined.