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Foreign investors' activities in Eastern Germany motivations and strategies

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  • Sander, Birgit

Abstract

The paper analyses foreign investors' activities in East Germany in the context of privatization. Based on FDI theories it attempts to explore their motivations and strategies by investigating their home countries as well as their target industries. About 5 p.c. of all privatized enterprises have been acquired by foreigners. Their share in planned investment and planned employment results to be markedly larger. Foreign investors are predominantly originating from those countries which have longstanding economic relations with West Germany. The main part of foreign investment goes into manufacturing industries; into booming as well as into ailing industries. The availability of wellqualified labour appears to be of major importance for nearly all investments while contracting favourable terms of sale and taking advantage of public investment support are especially important for commitments in ailing industries. Germany's EC-membership generates further incentives such as to take advantage of the EC regulatory framework. Using East German production sites as bridgeheads to serve markets in Central Eastern Europe has been a strong motivation in the beginning but meanwhile has lost importance. Comparing foreign to West German investors, by and large their decisions seem to be driven by the same determinants.

Suggested Citation

  • Sander, Birgit, 1992. "Foreign investors' activities in Eastern Germany motivations and strategies," Kiel Working Papers 550, Kiel Institute for the World Economy (IfW Kiel).
    • Handle: RePEc:zbw:ifwkwp:550
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    1. Jamuna Agarwal, 1980. "Determinants of foreign direct investment: A survey," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 116(4), pages 739-773, December.
    2. Siebert, Horst, 1990. "The economic integration of Germany," Kiel Discussion Papers 160, Kiel Institute for the World Economy (IfW Kiel).
    3. Schmidt, Klaus-Dieter, 1992. "Ownership structure and enterprise performance in the transition process: Evidence from Eastern Germany," Kiel Working Papers 530, Kiel Institute for the World Economy (IfW Kiel).
    4. Krüger, Reinald, 1992. "Privatisierung ostdeutscher Unternehmen in EG-koordinierten Krisenbranchen," Wirtschaftsdienst – Zeitschrift für Wirtschaftspolitik (1949 - 2007), ZBW - Leibniz Information Centre for Economics, vol. 72(11), pages 594-601.
    5. Alan Rugman, 1980. "Internalization as a general theory of foreign direct investment: A re-appraisal of the literature," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 116(2), pages 365-379, June.
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    1. Schmidt, Klaus-Dieter, 1994. "Treuhandanstalt and investment acquisitions: How to ensure that contracts are kept?," Kiel Working Papers 632, Kiel Institute for the World Economy (IfW Kiel).

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