"Foreign direct investment is an essential aspect of 'globalization' yet its empirical determinants are not well understood. What we do know is based either on poor data for a wide range of nations, or good data for the US and Swedish cases. In this paper, we provide evidence on the determinants of the activities of German multinational firms by using a newly available firm-level data set from the Deutsche Bundesbank. The specific goal of this paper is to demonstrate the relative role of country-level and firm-level determinants of foreign direct investment. We focus on three main questions: First, what are the main driving forces of German firms' multinational activities? Second, is there evidence that sector-level and firm-level factors shape internationalization patterns? Third, is there evidence of agglomeration effects in the foreign activities of German firms?" Copyright � CEPR, CES, MSH, 2005..

No abstract

Abstract:The choice between foreign direct investment (FDI) and exports has been a recurrent theme in the literature on international trade, yet few studies have analysed this choice at the level of the individual firm. This paper uses a new dataset to study the FDIversus-exports decision for banks. We use data on the foreign direct investment stocks and the cross-border provision of financial services of German banks for the period 1997-2000 to describe the regional pattern of banks' international activities. We find that country-and bank-specific variables capturing size have a major impact on banks' foreign activities. The results are consistent with the hypothesis that the realisation of economies of scale and the provision of trade-related finance shape globalisation patterns. Greater cultural and geographical distance, by contrast, potentially limit the international expansion of banks. Our results also suggest that FDI and cross-border services are complements rather than substitutes. Keywords:international banking, gravity equations, foreign direct investment, cross-border financial services JEL-Classification: F0, F21 Non Technical SummaryThis paper provides a first comprehensive assessment of the globalisation of the German banking industry based on bank-level data. By combining data from different sources, we draw a fairly complete picture of the foreign direct investments and the cross-border provision of financial services of German banks. The data we use covers the second half of the 1990s, ie a period in which the globalisation of the German banking industry was fully under way. In addition, we disentangle the effects of bank-and country-level explanatory variables, of regulatory and cultural factors, and of factors capturing market size on the internationalisation of German banks. Moreover, having access to data on all German banks, we can separate factors that influence the decision of banks to go abroad from those affecting the actual volume of international business. With regard to the latter, we find that the determinants of entry and of the volume of activity are qualitatively the same.In terms of robustness, we obtain the most stable results for variables that account for size at the bank level and at the country level. More internationally oriented and larger banks also have the largest foreign investments abroad. Larger markets (in terms of GDP) and a large volume of bilateral trade between Germany and a host country promote FDI. Hence, the intention to realise economies of scale is an important motive behind the international expansion of German banks. Moreover, the impact of the variables capturing bank and market size is the same across the different forms of foreign activities that we consider, ie FDI and cross-border financial services. In particular, the impact of trade is positive throughout. The provision of trade-related financial services thus remains a major driving force behind the globalisation of German banks. Besides, more profitable banks are more active internationally, w...

No abstract

No abstract