The Structure of Multinational Activity: Evidence from Germany

33 Pages Posted: 2 Apr 2008

See all articles by Andreas Waldkirch

Andreas Waldkirch

Colby College - Department of Economics

Date Written: July 2007


Recent empirical studies of the determinants of multinational activity across countries have found overwhelming support for a horizontal rather than a vertical model of foreign direct investment (FDI). The majority of these studies use data either originating in or targeted at the United States. This paper presents evidence from a dataset of German inward and outward FDI. The dataset is similar in scope to the widely used U.S. Bureau of Economic Analysis data, making the results comparable to those from previous studies. In addition, a new empirical specification is employed that avoids some of the problems that have plagued these studies. The results provide little indication of vertical multinationals. FDI happens largely between similarly endowed countries. Multinational firms originate in skilled-labor abundant countries, although the evidence is mixed on whether they are also small. A novel result is that German firms invest disproportionately in other European countries, while the reverse is not true.

Keywords: Foreign Direct Investment, Multinationals, Germany

JEL Classification: F21, F23

Suggested Citation

Waldkirch, Andreas, The Structure of Multinational Activity: Evidence from Germany (July 2007). Applied Economics, Forthcoming. Available at SSRN:

Andreas Waldkirch (Contact Author)

Colby College - Department of Economics ( email )

Waterville, ME 04901
United States
207-859-5244 (Phone)
207-859-5229 (Fax)

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