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The structure of multinational activity: evidence from Germany

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  • Andreas Waldkirch

Abstract

Recent empirical studies of the determinants of multinational activity across countries have found overwhelming support for a horizontal rather than a vertical model of Foreign Direct Investment (FDI). The majority of these studies use data either originating in or targeted at the US. This article presents evidence from a dataset of German inward and outward FDI. The dataset is similar in scope to the widely used US Bureau of Economic Analysis data, making the results comparable to those from previous studies. In addition, a new empirical specification is employed that avoids some of the problems that have plagued these studies. The results provide little indication of vertical multinationals. FDI happens largely between similarly endowed countries. Multinational firms originate in skilled-labour abundant countries, although the evidence is mixed on whether they are also small. A novel result is that German firms invest disproportionately in other European countries, while the reverse is not true.

Suggested Citation

  • Andreas Waldkirch, 2010. "The structure of multinational activity: evidence from Germany," Applied Economics, Taylor & Francis Journals, vol. 42(24), pages 3119-3133.
    • Handle: RePEc:taf:applec:v:42:y:2010:i:24:p:3119-3133
    DOI: 10.1080/00036840801964872
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    1. Helga Kristjánsdóttir, 2005. "The Knowledge-Capital Model and Small Countries," EPRU Working Paper Series 05-09, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
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    Cited by:

    1. Gnanaraj Chellaraj & Keith E. Maskus & Aaditya Mattoo, 2013. "Labor Skills and Foreign Investment in a Dynamic Economy: Estimating the Knowledge-capital Model for Singapore," Review of Development Economics, Wiley Blackwell, vol. 17(4), pages 627-643, November.
    2. Erdey, László, 2004. "A működőtőke-áramlás a telephelyválasztás elméletének tükrében [The flow of operating capital in the light of the theory of location choice]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(5), pages 472-494.
    3. Gnanaraj Chellaraj & Aaditya Mattoo, 2009. "Can the Knowledge-Capital Model Explain Sectoral Foreign Invesment? Evidence From Singapore," Economics Study Area Working Papers 101, East-West Center, Economics Study Area.

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