FDI of German Companies During Globalization and Deglobalization |
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Authors: | Gerhard Kling Joerg Baten Kirsten Labuske |
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Institution: | (1) Bristol Business School, University of the West of England, Coldharbour Lane, Bristol, BS16 1QY, UK;(2) Department of Economics, University of Tuebingen and CESifo, Mohlstrasse 36, 72074 Tuebingen, Germany;(3) Department of Economics, University of Tuebingen, Mohlstrasse 36, 72074 Tuebingen, Germany |
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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. |
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