Regions within a country have always stood in competition with each other in terms of attracting new businesses. In the course of globalisation, the international dimension of location decisions has increased considerably in recent years. This research focuses on the question of whether and to what extent eastern Germany as a business location is internationally attractive to investors.
To determine the position of eastern Germany in international location competition, the study uses an international comparison of location factors that have been determined to be significant for enterprise decisions. Eastern Germany in this study includes the five new federal states and Berlin. In order to identify the truly relevant site factors, a two-prong strategy was pursued. With the help of a regression approach (panel data analysis), the factors that have a significant influence on the development of foreign direct investments were determined. In addition to the econometric analysis, a written survey on 40 individual investment site factors was conducted among subsidiaries of foreign-based enterprises in eastern Germany and of foreign operations of eastern German enterprises in Central and Eastern Europe as well as in eastern Asia. Additionally, foreign and domestic parent companies were queried as to the relevance of these site factors in their locational decisions.
In the analysis of the panel data, 12 site factors were singled out that make a significant contribution to explaining the stocks of direct investments in the 46 countries included in the observation period 1995–2004. Within the framework of the written survey, nine of these factors proved to be highly relevant for transborder investment decisions. In order to test the robustness of the evaluation of the site factors carried out among firms in eastern Germany, central and eastern Europe as well as those based in Asia, the 12 determinants of site choice were analysed on the basis of secondary data for 12 countries in the comparison. Using a benchmark procedure, the empirical findings were transferred to a country-specific ranking for each of the 12 factors. The subsequent strength/weakness analysis of eastern Germany as an investment site forms the basis for recommendations of actions that political decision-makers could take to improve investment conditions in eastern Germany. Especially important is action in the areas of education and research so that the new federal states can compete successfully in site competition for knowledge-intensive and innovation-oriented enterprises.
Berlemann, M. et al. (2008): Die neuen Bundesländer im internationalen Standortvergleich, ifo Dresden Studie 43, Munich/Dresden.
Grundig, B., Pohl, C. and H. Schmalholz (2008): Ostdeutschland im internationalen Standortwettbewerb gut positioniert - Ergebnisse einer Unternehmensbefragung, in: ifo Dresden berichtet 02/2008, p. 3-10 (Download, PDF, 124 KB).
Grundig, B., Pohl, C. and H. Schmalholz (2008): Ostdeutschland im internationalen Standortvergleich, in: ifo Dresden berichtet 01/2008, p. 33-40 (Download, PDF, 153 KB).
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