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Foreign Subsidiaries in the East German Innovation System – Evidence from Manufacturing Industries

  • Jutta Günther
  • Björn Jindra
  • Johannes Stephan

This paper analyses the extent of technological capability of foreign subsidiaries located in East Germany, and looks at the determinants of foreign subsidiaries’ technological sourcing behaviour. The theory of international production underlines the importance of strategic and regional level variables. However, existing empirical approaches omit by and large regional level factors. We employ survey evidence from the “FDI micro data- base” of the IWH, that was only recently made available, to conduct our analyses. We find that foreign subsidiaries are above average technologically active in comparison to the whole East German manufacturing. This can be partially explained by the industrial structure of foreign direct investment. However, only a limited share of foreign subsidiaries with R&D and/or innovation activity source technological knowledge from the East German innovation system. If a subsidiary follows a competence augmenting strategy or does local trade, it is more likely to source technological knowledge locally. The endowment of a region with human capital and a scientific infrastructure has a positive effect too. The findings suggest that foreign subsidiaries in East Germany are only partially linked with the regional innovation system. Policy implications are discussed.

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Paper provided by Halle Institute for Economic Research in its series IWH Discussion Papers with number 4.

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Date of creation: Jun 2008
Date of revision:
Handle: RePEc:iwh:dispap:4-08
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  1. von Hippel, Eric, 1976. "The dominant role of users in the scientific instrument innovation process," Research Policy, Elsevier, vol. 5(3), pages 212-239, July.
  2. Giroud, Axèle, 2007. "MNEs vertical linkages: The experience of Vietnam after Malaysia," International Business Review, Elsevier, vol. 16(2), pages 159-176, April.
  3. Criscuolo, P. & Narula, R. & Verspagen, B., 2002. "The relative importance of home and host innovation systems in the internationalisation of MNE R&D: a patent citation analysis," Working Papers 02.20, Eindhoven Center for Innovation Studies.
  4. Cantwell, John & Piscitello, Lucia, 2002. "The location of technological activities of MNCs in European regions: The role of spillovers and local competencies," Journal of International Management, Elsevier, vol. 8(1), pages 69-96.
  5. Narula, Rajneesh, 2002. "Innovation systems and 'inertia' in R&D location: Norwegian firms and the role of systemic lock-in," Research Policy, Elsevier, vol. 31(5), pages 795-816, July.
  6. John Cantwell & Simona Iammarino, 1998. "MNCs, Technological Innovation and Regional Systems in the EU: Some Evidence in the Italian Case," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 5(3), pages 383-408.
  7. Patel, Pari & Vega, Modesto, 1999. "Patterns of internationalisation of corporate technology: location vs. home country advantages1," Research Policy, Elsevier, vol. 28(2-3), pages 145-155, March.
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