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Firm Heterogeneity and Choice of Ownership Structure: An Empirical Analysis of German FDI in India

The University of Nottingham, GEP Research Paper 2008/39

29 Pages Posted: 25 Jul 2009  

Holger Görg

University of Kiel; Kiel Institute for the World Economy

Peter Nunnenkamp

University of Kiel

Verena Lauber

University of Heidelberg

Birgit Meyer

Vienna University of Economics and Business; University of Kiel; University of Kiel - Institute for World Economics (IfW)

Date Written: 2008

Abstract

We contribute to the literature on the heterogeneity of multinational enterprises (MNEs) and the relevance of firm characteristics for analyzing the determinants of outward foreign direct investment (FDI). The focus is on the role of firm-level heterogeneity when MNEs decide on the share of ownership in foreign affiliates. We combine two firm-specific datasets on German MNEs with varying equity stakes in Indian affiliates. The impact of firm characteristics on ownership shares is assessed in the context of OLS and fractional logit models, controlling for industry and location characteristics. We show that the effect of several characteristics differs between the establishment of new affiliates by German MNEs and their engagement in already existing Indian firms. Most notably, the productivity of the German parents matters only for ownership shares in new affiliates.

Keywords: multinational enterprises, firm characteristics, Indian locations, German FDI, ownership share

JEL Classification: F23, L25

Suggested Citation

Görg, Holger and Nunnenkamp, Peter and Lauber, Verena and Meyer, Birgit, Firm Heterogeneity and Choice of Ownership Structure: An Empirical Analysis of German FDI in India (2008). The University of Nottingham, GEP Research Paper 2008/39. Available at SSRN: https://ssrn.com/abstract=1438049 or http://dx.doi.org/10.2139/ssrn.1438049

Holger Gorg (Contact Author)

University of Kiel ( email )

Olshausenstr. 40
D-24118 Kiel, Schleswig-Holstein 24118
Germany

Kiel Institute for the World Economy ( email )

P.O. Box 4309
Kiel, D-24100
Germany

Peter Nunnenkamp

University of Kiel ( email )

D-24100 Kiel
Germany

Verena Lauber

University of Heidelberg ( email )

Grabengasse 1
Heidelberg, 69117
Germany

Birgit Elisabeth Meyer

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

University of Kiel ( email )

Olshausenstr. 40
D-24118 Kiel, Schleswig-Holstein 24118
Germany

University of Kiel - Institute for World Economics (IfW)

Duesternbrooker Weg 120
D-24118 Kiel
Germany

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