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Eastern Germany in the Process of Catching Up: The Role of Foreign and West German Investors in Technological Renewal

Jutta Günther () and Oliver Gebhardt

Eastern European Economics, 2005, vol. 43, issue 3, 78-102

Abstract: Foreign direct investment (FDI) as a means to support economic transformation and the ongoing process of catch-up development caught researchers' attention for a number of Central and East European countries. Little research, however, has been carried out for eastern Germany in this respect, although FDI plays an important role there too. Descriptive analysis via the use of unique survey data shows that foreign and west German affiliates perform much better with respect to technological capability and labor productivity than do east German firms. The results of the regression analysis, however, show that it is not the status of ownership as such that forms a significant determinant of innovativeness in eastern Germany but, rather, firm characteristics, such as firm size, export intensity, technical state of the equipment, and research and development (R&D) activities. Given that foreign and west German affiliates perform better with respect to all of these characteristics, they can be considered as a means to support the process of technological renewal and economic development.

Date: 2005
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