International investors rate Eastern Germany because of its technological advantages

 

The results show a change in investment behaviour in Eastern Germany. Since the mid-1990s the new federal states have increasingly been attracting investors who are aiming to diversify their products or exploit technological advantages rather than primarily focus on cost advantages concerning factors of production or extending their existing production. The significance of the investment motives depends on the country of origin, type of market entry and the industry to which the multinational investor belongs. Eastern Germany performs particularly well when it comes to soft location factors. These include things such as the availability of housing, the supply of child care, the personal safety of foreign employees, local health care coverage and the culture on offer.

However, Eastern Germany is also given positive evaluations in terms of the potential for technological cooperation, the supply of labour and the availability of government support. Björn Jindra, one of the authors of the study, interprets the results as showing a greatly increased appreciation of Eastern Germany as a location: “It’s with technology‑oriented companies in particular that Eastern Germany enjoys a good reputation. Overall, the results show that the subsidiaries of multinational investors in the new federal states have been technologically upgraded. Due to the quality of the region’s location factors it has been possible in the course of the transformation process to achieve a long-term improvement in the position of the new federal states in terms of the international division of labour”.

The basis for the research is the IWH-FDI Micro Database. The data were collected in autumn 2009. The survey of foreign investors covers 629 observations in the production sector and selected service sectors of the federal states of Eastern Germany. The aim of the survey series is to provide a comprehensive analysis of the activities of multinational investors in Eastern Germany. The IWH‑FDI survey has been conducted annually in the federal states of Eastern Germany since 2007.