Foreign Subsidiaries in the East German Innovation System – Experience from Manufacturing Industries

Applied Economics Quarterly Supplement, No. 59, pp. 137-165, 2008

Posted: 5 Sep 2009 Last revised: 6 May 2011

See all articles by Björn Jindra

Björn Jindra

Halle Institute for Economic Research; Copenhagen Business School

Jutta Günther

Halle Institute for Economic Research

Johannes Florian Stephan

IWH, Halle Institute for Economic Research

Date Written: 2008

Abstract

This paper analyses the extent of technological capability of foreign subsidiaries located in East Germany, and looks at the determinants of foreign subsidiaries’ technological sourcing behaviour. The theory of international production underlines the importance of strategic and regional level variables. However, existing empirical approaches omit by and large regional level factors. We employ survey evidence from the “FDI micro database” of the IWH, that was only recently made available, to conduct our analyses. We find that foreign subsidiaries are above average technologically active in comparison to the whole East German manufacturing. This can be partially explained by the industrial structure of foreign direct investment. However, only a limited share of foreign subsidiaries with R&D and/or innovation activity source technological knowledge from the East German innovation system. If a subsidiary follows a competence augmenting strategy or does local trade, it is more likely to source technological knowledge locally. The endowment of a region with human capital and a scientific infrastructure has a positive effect too. The findings suggest that foreign subsidiaries in East Germany are only partially linked with the regional innovation system. Policy implications are discussed.

Keywords: East Germany, Regional Innovation System, Foreign Direct Investment

JEL Classification: O30, O38, F20

Suggested Citation

Jindra, Björn and Günther, Jutta and Stephan, Johannes Florian, Foreign Subsidiaries in the East German Innovation System – Experience from Manufacturing Industries (2008). Applied Economics Quarterly Supplement, No. 59, pp. 137-165, 2008, Available at SSRN: https://ssrn.com/abstract=1468289

Björn Jindra

Halle Institute for Economic Research ( email )

P.O. Box 11 03 61
Kleine Maerkerstrasse 8
D-06017 Halle, 06108
Germany

Copenhagen Business School ( email )

Solbjerg Plads 3
Frederiksberg C, DK - 2000
Denmark

Jutta Günther (Contact Author)

Halle Institute for Economic Research ( email )

P.O. Box 11 03 61
Kleine Maerkerstrasse 8
D-06017 Halle, 06108
Germany

Johannes Florian Stephan

IWH, Halle Institute for Economic Research ( email )

P.O. Box 11 03 61
Kleine Maerkerstrasse 8
D-06017 Halle (Saale), 06108
Germany

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