Bridge Over Troubled Water? German Foreign Direct Investment in Times of Geopolitical Tensions

Stefan Goldbach and Volker Nitsch

Publications of Darmstadt Technical University, Institute for Business Studies (BWL) from Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL)

Abstract: Evidence of geoeconomic fragmentation does not necessarily apply to all types of cross-border business activities alike. For foreign direct investment, for instance, an increase in trade costs due to heightened geopolitical risk may actually make production abroad relatively more attractive. This paper examines the geographic pattern of German foreign direct investment over the period from 2002 to 2022. Using a variety of models and specifications, we find no consistent evidence that a host country’s geopolitical position has a measurable impact on German investment once traditional gravity factors are accounted for.

Date: 2026-01-16
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Journal Article: Bridge over troubled water? German foreign direct investment in times of geopolitical tensions (2026)
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Persistent link: https://EconPapers.repec.org/RePEc:dar:wpaper:160823

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