Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/78228
Authors: 
Engemann, Martina
Lindemann, Henrike
Year of Publication: 
2013
Series/Report no.: 
Discussion Paper, Deutsche Bundesbank 24/2013
Abstract: 
Modern production processes often involve several sequential stages which are performed in many different countries. This pattern of vertical specialization does not only affect trade between countries but it is also of importance for foreign direct investment (FDI). In this paper, we therefore adopt the idea of Kremer (1993) and Costinot et al. (2011) of a sequential production process which is subject to mistakes to the theory of FDI. Using firm-level panel data on German outward FDI, we show that the affiliate sector's position in the value chain affects the firm's FDI location choice. Affiliates in sectors that are positioned toward the end of the value chain are more likely to be located in more productive countries.
Subjects: 
Foreign Direct Investment
O-Ring Theory
Upstreamness
JEL: 
F14
F23
ISBN: 
978-3-86558-929-3
Document Type: 
Working Paper

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