Financial constraints and the margins of FDI
Claudia M. Buch
Bundesbank Discussion Paper 29/2009,
2009
Abstract
Recent literature on multinational firms has stressed the importance of low productivity as a barrier to the cross-border expansion of firms. But firms may also need external finance to shoulder the costs of entering foreign markets. We develop a model of multinational firms facing real and financial barriers to foreign direct investment (FDI), and we analyze their impact on the FDI decision (the extensive margin) and foreign affiliate sales (the intensive margin). We provide empirical evidence based on a detailed dataset of German multinationals which contains information on parent-level and affiliate-level financial constraints as well as about the location the foreign affiliates. We find that financial factors constrain firms’ foreign investment decisions, an effect felt in particular by large firms. Financial constraints at the parent level matter for the extensive, but less
so for the intensive margin. For the intensive margin, financial constraints at the affiliate level are relatively more important.
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Lending Technology, Bank Organization and Competition
Hans Degryse, Steven Ongena, Günseli Tümer-Alkan
Journal of Financial Transformation,
2009
Abstract
This paper reviews recent theoretical and empirical studies investigating how both bank technology and organization shape bank-borrower interactions. We refer to two related concepts for bank technology. First, the technologies banks employ in loan granting decisions and second, the advances in information technology linked to the bank's lending technology. We also summarize and interpret the theoretical and empirical work on bank organization and its influence on lending technologies. We show that the choice of lending technology and bank organization depend heavily on the availability of information, the technological progress in the collection of information, as well as the banking market structure and the legal environment. We draw important policy conclusions from the literature. Competition authorities and supervisors have to remain alert to the consequences of the introduction of any new technology because: (1) advances in technology do not necessarily lead to more intense banking competition, and (2) the impact of technological and financial innovation on financial efficiency and stability depends on the incentives of the entire „loan production chain.‟
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Subsidiary Roles, Vertical Linkages and Economic Development: Lessons from Transition Economies
Björn Jindra, Axèle Giroud, J. Scott-Kennel
Journal of World Business,
2009
Abstract
Vertical supply chain linkages between foreign subsidiaries and domestic ?rms are important mechanisms for knowledge spillovers, contributing to the economic development of host economies. This paper argues that subsidiary roles and technological competences affect the extent of vertical linkages as such as well as their potential for technological spillovers. Using survey evidence from 424 foreign subsidiaries based in transition economies, we tested for the effect of subsidiaries’ autonomy, initiative, technological capability, internal and external technological embeddedness on the extent and intensity of forward and backward vertical linkages. The evidence supports our main argument that the potential of technology diffusion via vertical linkages depends on the nature of subsidiary roles. We discuss the implications for transition as well as other developing countries.
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Race to the Market: Can Standards Survive the Acceleration of Innovation and Product Life Cycles?
Ulrich Blum
Spatial Dispersed Production and Network Governance, Papers Presented at the 11th Uddevalla Symposium, 15 – 17. May 2008, Kyoto, Research Report 2008,
2008
Abstract
Plagiarism of emerging market countries has for a considerable time been seen as the main challenge to the western approach of codifying and securing intellectual property rights (IPRs). This neglects the fact that historically all countries which tried to converge to the level of successful economies copied technology. The discussion shadows our view that the more imminent question is whether the steady increase in competition intensity which shortens product life cycles and puts pressure on the invention and innovation system, provides enough time to patent and to standardize. As patent activity not only provides incentives for sinking costs into R&D but is also a first step in the dissemination of technologies, and as standards, especially formal standards, generate level playing fields in broad and reliable markets, this may be critical in the long run. Furthermore, the migration of technologies as a result of a steady reorganization of the spatial division of labor may lead to the adverse situation that countries harboring technologies do not have appropriate institutions for knowledge codification.
Exogenous factors that – at least in the short run – cannot be influenced by the standardization bodies are the level of cooperation among interested parties (and mutual trust and institutional linkage), the competitiveness of the technology, the ability to generate externalities by knowledge codification, and the productivity of the technologies. The most important single success factor that standardization bodies can influence is the speed with which a committee proceeds to timely publish formal standards. With reference to a game-theoretical model and based on data for 1997 and 2007 on published formal standards, we show that until now, standardization bodies seem to have successfully coped with the situation.
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Der lange Schatten des Sozialismus: Folgen für die Wirtschaftspolitik in Ostdeutschland
Ulrich Blum
List Forum für Wirtschafts- und Finanzpolitik,
2008
Abstract
East Germany’s economy growth was not able to close, over the last ten years, the lag against the West German economy. This paper inquires into the economic reasons, especially those that can be traced in history. It is shown that the exodus of elites from what was Central Germany started in the 1930s because of the persecution of the Jewish elites. During the period after the Second World War until the construction of the wall in 1961 especially young and qualified people left the Soviet Zone and later the G.D.R. Thus, the elites destroyed in the Third Reich and the Second World War could not be replaced exogenously. In the 1970s, an inadequate economic system destroyed the still existing industrial middle class which was an important base of productivity and helped to generate foreign income because of its export intensity to the Western countries. This generated a current account crisis which was only overcome by a loan from West Germany, the so-called “Strauß-Kredit”. In 1988, however, the fundamental problems again became visible and enforced a change of the economic system. The privatisation strategy by the Treuhand by and large did not sell or restitute enterprises but sold plants out of the fragmented combines. Today, the visible deficit in headquarter function is the most important single obstacle against growth and wealth in the New Lander. It can be expected that this will only disappear within a new technology cycle.
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The Role of the Human Capital and Managerial Skills in Explaining the Productivity Gaps between East and West
Johannes Stephan, Wolfgang Steffen
Eastern European Economics,
No. 6,
2008
Abstract
This paper assess determinants of productivity gaps between firms in the European transition countries and regions and firms in West Germany. The analysis is conducted at the firm level by use of a unique database constructed by field work. The determinants tested in a simple econometric regression model are focussed upon the issue of human capital and modern market-oriented management. The results are novel in as much as a solution was established for the puzzling results in related research with respect to a comparison of formal qualification between East and West. Furthermore, the analysis was able to establish that the kind of human capital and expertise mostly needed in the post-socialist firms are related to the particular requirements of a competitive market-based economic environment. Finally, the analysis also finds empirical support for the role of capital deepening in productivity catch-up, as well as the case that the gaps in labour productivity are most importantly rooted in a more labour-intense production, which does not give rise to a competitive disadvantage.
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East German Innovation System attractive for Foreign Investors
Jutta Günther, Björn Jindra, Johannes Stephan
Wirtschaft im Wandel,
No. 1,
2008
Abstract
Foreign direct investment (FDI) plays an important role in the catching-up process of East Germany due to direct employment- and demand related effects. However, this article takes a technological perspective on FDI in East Germany. It considers technological activities of foreign investors (R&D and innovation) and asks to what extent these are integrated into the East German innovation system. In other words, do foreign investors interact technologically with domestic enterprises and scientific institutions? So far, there seems to be a striking absence of empirical evidence on this issue. The basis for our analysis is recent data from a representative survey of foreign direct investors in East German manufacturing completed in 2007. The findings show that on average foreign investors are more R&D and innovation intensive compared to the total of East German manufacturing. In addition, their technological activities are by no means isolated from the East German innovation system. Foreign subsidiaries seem to benefit from East German customers, suppliers and especially scientific institutions with regard to locally conducted R&D and innovation. Contrary to existing assumptions the East German innovation system seems to be particularly attractive for the most technologically active foreign subsidiaries. This could constitute a major locational advantage for FDI in East Germany over Central and East Europe. However, the technologically active foreign investors believe that only East German suppliers are able to benefit from their technological cooperation. The same cannot be said about East German customers or competitors. Thus, the potential for technological externalities from FDI in East Germany seems still to be limited.
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The Role of the Human Capital and Managerial Skills in Explaining the Productivity Gaps between East and West
Wolfgang Steffen, Johannes Stephan
IWH Discussion Papers,
No. 11,
2007
Abstract
This paper assess determinants of productivity gaps between firms in the European transition countries and regions and firms in West Germany. The analysis is conducted at the firm level by use of a unique database constructed by field work. The determinants tested in a simple econometric regression model are focussed upon the issue of human capital and modern market-oriented management. The results are novel in as much as a solution was established for the puzzling results in related research with respect to a comparison of formal qualification between East and West. Furthermore, the analysis was able to establish that the kind of human capital and expertise mostly needed in the post-socialist firms are related to the particular requirements of a competitive marketbased economic environment. Finally, the analysis also finds empirical support for the role of capital deepening in productivity catch-up, as well as the case that the gaps in labour productivity are most importantly rooted in a more labour-intense production, which does not give rise to a competitive disadvantage.
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Determinants of Female Migration – The Case of German NUTS 3 Regions
Alexander Kubis, Lutz Schneider
IWH Discussion Papers,
No. 12,
2007
Abstract
Our study examines the regional patterns and determinants of migration flows of young women. At the NUTS-3 regional level, i.e. the district level (Kreise), the German internal migration flows of the year 2005 are explored. From descriptive statistics it can be seen that peripheral regions in East Germany face the strongest migration deficit with respect to young women, whereas agglomerations in West Germany but also in the East benefit from an intense migration surplus within this group. An econometric analysis of determinants of regional migration flows gives evidence of the importance of labour market, family-related and educational migration motives. Generally speaking, young women tend to choose regions with good income and job opportunities, in addition they seem to be attracted by regions enabling an appropriate balance between family and career. Furthermore the existence of excellent educational facilities is a significant influence for young women’s migration. This educationally motivated type of migration generates a long lasting effect on the regional migration balance, especially when the educational opportunities in the destination region are associated with adequate career perspectives for high qualified female graduates. In view of considerable losses due to migration, the study shows various options for action. An important course of action is to incorporate policy measures improving regional employment and income opportunities. Secondly, extending vocational and academic offers addressed to women seems to be a suitable way to stimulate women’s immigration. Moreover, enhancing the social infrastructure, which contributes to a satisfactory work life balance, might attract young women or at least reduce the number of them leaving a region.
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„Where Have All the Young Girls Gone …?” Regional Analysis of Young Women’s Migration Behavior
Alexander Kubis, Lutz Schneider
Wirtschaft im Wandel,
No. 8,
2007
Abstract
The study examines the patterns and determinants of migration flows of young women at the age between 18 and 30 years. At the NUTS-3 regional level, i.e. the district level (Kreise), the German internal migration flows of the year 2005 are explored. From descriptive statistics it can be seen that peripheral regions in East Germany face the strongest migration deficit with respect to young women, whereas agglomerations in West Germany but also in the East benefit from an intense migration surplus within this group. The econometric analysis of determinants of regional migration flows emphasizes the importance of economic, family-related and educational migration motives. Generally speaking, young women tend to choose regions with good income and job opportunities. In addition, they seem to be attracted by regions enabling an appropriate balance between family and career. Furthermore, the existence of excellent educational facilities is a significant pull factor regarding young female migration. This educationally motivated type of migration generates an enduring effect on the regional balance of migration, which is especially true if the educational opportunities in the target region are associated with adequate career perspectives for highly qualified female graduates. In terms of recommendations for action, the study underlines the importance of policy measures improving the regional job and income opportunities. Secondly, the upgrading of fields of study mainly chosen by women seems to be a suitable way to stimulate female immigration. Moreover, the enhancement of the social infrastructure, which promotes a satisfactory work life balance, might attract young women or at least reduce the number of them leaving the region.
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