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Who Goes East? The Impact of Enlargement on the Patterns of German FDI

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  • Claudia M. Buch
  • Jörn Kleinert

Abstract

Affiliates of German firms in Eastern Europe differ from those in the rest of the world. They have smaller sales and they employ more labor. Labor productivity is thus lower than in affiliates of German firms elsewhere. Moreover, multinational activity in Eastern Europe is mostly unilaterally whereas, for industrialized countries, bilateral FDI linkages dominate. In this paper, we aim at explaining differences in the activities of German multinational firms in Eastern and Western Europe. Do German firms engage in different activities in Eastern and Western Europe, i.e. do the types of affiliates differ? Or do smaller German parent firms particularly benefit from enlargement, i.e. do characteristics of the parents differ in a systematic way?

Suggested Citation

  • Claudia M. Buch & Jörn Kleinert, 2006. "Who Goes East? The Impact of Enlargement on the Patterns of German FDI," IAW Discussion Papers 24, Institut für Angewandte Wirtschaftsforschung (IAW).
  • Handle: RePEc:iaw:iawdip:24
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    References listed on IDEAS

    as
    1. Sascha O. Becker & Karolina Ekholm & Robert Jäckle & Marc-Andreas Muendler, 2005. "Location Choice and Employment Decisions: A Comparison of German and Swedish Multinationals," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), pages 693-731.
    2. James R. Markusen, 2004. "Multinational Firms and the Theory of International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262633078, January.
    3. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    4. Luís M B Cabral & José Mata, 2003. "On the Evolution of the Firm Size Distribution: Facts and Theory," American Economic Review, American Economic Association, pages 1075-1090.
    5. Evans, David S, 1987. "Tests of Alternative Theories of Firm Growth," Journal of Political Economy, University of Chicago Press, vol. 95(4), pages 657-674, August.
    6. Elhanan Helpman & Marc J. Melitz & Stephen R. Yeaple, 2004. "Export Versus FDI with Heterogeneous Firms," American Economic Review, American Economic Association, vol. 94(1), pages 300-316, March.
    7. Markusen, James R. & Venables, Anthony J., 1998. "Multinational firms and the new trade theory," Journal of International Economics, Elsevier, vol. 46(2), pages 183-203, December.
    8. Helpman, Elhanan, 1984. "A Simple Theory of International Trade with Multinational Corporations," Journal of Political Economy, University of Chicago Press, vol. 92(3), pages 451-471, June.
    9. S. Lael Brainard, 1993. "A Simple Theory of Multinational Corporations and Trade with a Trade-Off Between Proximity and Concentration," NBER Working Papers 4269, National Bureau of Economic Research, Inc.
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    More about this item

    Keywords

    Eastern enlargement; foreign direct investment; firm heterogeneity;

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production

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