Journal Article

Firm Heterogeneity, Industry Characteristics and Types of FDI: The Case of German FDI in the Czech Republic


  • Görg
  • H.
  • Mühlen
  • H.
  • Nunnenkamp
  • P.
Publication Date

In addition to firm and industry characteristics, the heterogeneity of foreign direct investment (FDI) has to be taken into account when analyzing the determinants of outward FDI. We combine two firm-specific datasets on German firms with subsidiaries and joint ventures in the Czech Republic, compared to a control group of German firms without FDI in this host country. The impact of firm and industry characteristics on FDI decisions is assessed by estimating two-step Heckman models. We find that larger, more productive and more experienced firms are more likely to invest in the Czech Republic. Firm characteristics also affect the size of FDI in manufacturing. The relevance of both firm and industry characteristics critically depends on whether FDI is horizontal or vertical.

Kiel Institute Expert


JEL Classification
F23, L25

Key Words

  • firm heterogeneity
  • industry characteristics
  • multinational enterprises
  • sector-specific FDI
  • vertical and horizontal FDI