FDI of German companies during globalization and deglobalization

Gerhard Kling, Joerg Baten, Kirsten Labuske

Research output: Contribution to journalArticle

Abstract

Based on micro-level data of German companies from 1873 to 1927, we identified horizontal and vertical FDI applying a Knowledge-Capital model and analyzed individual FDI decisions. Our KC model revealed that market-driven FDI predominated; however, wage gaps and differences in human capital stimulated cost-driven FDI flows, which accounted for up to 10% of total FDI. On an individual level, large companies with high profitability conducted more FDI. Higher tariffs after WWI enhanced FDI, as companies could circumvent trade barriers—but declining openness reduced FDI. In spite of disintegration after WWI, the propensity to invest increased due to higher market concentration and firm specific investment patterns—albeit industry agglomeration effects were of minor importance.
Original languageEnglish
Pages (from-to)247-270
Number of pages24
JournalOpen Economies Review
Volume22
Issue number2
DOIs
Publication statusPublished - Apr 2011

Keywords

  • FDI
  • Globalization
  • protection
  • Germany

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