Ownership, Capital or Outsourcing: What Drives German Investment to Eastern Europe?

Dalia Marin, Andzelika Lorentowicz and Alexander Raubold

No 3515, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: The Paper takes a first look at the host and home country effects of German foreign direct investment (FDI) in Eastern Europe based on new survey data of 1050 investment projects in Eastern Europe by 420 German multinationals during the 1990s. We find that German investors transfer a substantial amount of financial capital to Eastern Europe. Furthermore, the most dynamic and innovative segment of the German economy invests in the East which explains why single owned firms dominate as the form of control. We also find strong evidence for vertical FDI suggesting that German corporations are outsourcing a substantial share of their production to Eastern European affiliates to exploit lower wages in the East.

Keywords: Corporate governance; Capital flows; Globalization; Eastern enlargement; vertical vs horizontal FDI (search for similar items in EconPapers)
JEL-codes: F15 F21 G32 G34 (search for similar items in EconPapers)
Date: 2002-09
New Economics Papers: this item is included in nep-cfn, nep-eec and nep-ifn
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Citations: View citations in EconPapers (14)

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Working Paper: Ownership, Capital or Outsourcing: What Drives German Investment to Eastern Europe? (2002)
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