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

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  • Daniel Münich
  • Martin Srholec
  • Michael Moritz
  • Johannes Schäffler

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 fi rm-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 Münich & Martin Srholec & Michael Moritz & Johannes Schäffler, 2014. "Mothers and Daughters: Heterogeneity of German Direct Investments in the Czech Republic," Prague Economic Papers, University of Economics, Prague, vol. 2014(1), pages 42-62.
  • Handle: RePEc:prg:jnlpep:v:2014:y:2014:i:1:id:472:p:42-62
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    Citations

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    Cited by:

    1. Schäffler, Johannes, 2016. "German Direct Investments in the Czech Republic – Employment Effects on German Multinational Enterprises," Annual Conference 2016 (Augsburg): Demographic Change 145526, Verein für Socialpolitik / German Economic Association.
    2. Hecht, Veronika & Moritz, Michael & Noska, Patricia & Schäffler, Johannes, 2016. "Types of FDI and determinants of affiliate size: the classification makes the difference," IAB Discussion Paper 201625, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    3. repec:iab:iabdpa:201806 is not listed on IDEAS
    4. Falilou Fall & Christine Lewis, 2017. "Fostering Productivity for Income Convergence in the Czech Republic," OECD Economics Department Working Papers 1362, OECD Publishing.
    5. 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].

    More about this item

    Keywords

    Czech Republic; Germany; multinational enterprise; cluster analysis; foreign affiliate; vertical investment;

    JEL classification:

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

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