Open Economies Review

, Volume 22, Issue 2, pp 247–270

FDI of German Companies During Globalization and Deglobalization

Research Article
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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.

Keywords

FDI Globalization Protection Germany 

JEL Classification

F21 N73 N74 

Copyright information

© Springer Science+Business Media, LLC 2009

Authors and Affiliations

  1. 1.Bristol Business SchoolUniversity of the West of EnglandBristolUK
  2. 2.Department of EconomicsUniversity of Tuebingen and CESifoTuebingenGermany
  3. 3.Department of EconomicsUniversity of TuebingenTuebingenGermany

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