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The geography of firm internationalisation in Germany: exploring domestic and foreign heterogeneity across regions and sectors

Nguyen, David (2017) The geography of firm internationalisation in Germany: exploring domestic and foreign heterogeneity across regions and sectors. PhD thesis, The London School of Economics and Political Science (LSE).

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Identification Number: 10.21953/lse.66xf0ghpj9an


The present thesis explores the internationalisation of firms in relation to regionsector characteristics. We focus on outward investment by German firms and classify the heterogeneity across firms, regions and sectors, as well as foreign destinations. The thesis is structured in 5 chapters: a general introduction, followed by 3 empirical chapters and a final conclusion. In the introductory chapter we provide a general conceptual framework and selective review of the literature. Our starting point is that internationalisation is heterogenous across firms as it requires ownership advantages. However, the source of these is less explored and we discuss how regional factors such as the proximity to MNEs can influence foreign expansions. Conceptually we rely on spillover and competition effects and put forward that MNEs can act as catalysts for internationalising domestic firms. Chapter 2 analyses the propensity of German firms to be active as outward investors, exploring and qualifying the heterogeneity across firms, regions and sectors. We find that different forms of proximity matter for the intensive and extensive margins of outward investment by German firms. First, region-sector co-location with MNEs is more important than regional co-location. This lends support to the notion of technological proximity as a facilitator of spillovers. Second, the association between region-sector proximity and the propensity of firms to invest abroad is larger at finer spatial scales. This hints to the tacitness of some knowledge and information about internationalisation processes, as these types of effects and externalities mainly arise between spatially proximate firms. Third, region-sector proximity is shown to matter most when the firm and the proximate MNE are both German-owned. It highlights a potential role of cultural proximity and regional embeddedness for positive externalities or feedback loops to occur. Chapter 3 enquires how destination-specific ties available in the home region in Germany can be leveraged by the internationalising firm when making location decisions abroad. We provide empirical evidence on this by using data on inward and outward investment linkages and migrant networks between a German region and foreign destination. Our findings also reveal that those matter more for likely first-time investors, while within business group experience is not shown to play a role. Using a mixed logit model we further highlight significant heterogeneity across firms in their directionality of outward investments. Larger firms are found to be able to expand to more distant foreign destinations while smaller firms mainly choose European locations. Chapter 4 turns our focus to whole sectors and compares their domestic and global geography. To do so we use detailed geocoded data on the global locations of German manufacturing firms. We reveal that also at the global level there is considerable heterogeneity in the spatial pattern across sectors. The concentration ’intensity’ is also generally higher than at the domestic level and the level of technology in a sector plays a key role for its pattern. While at the domestic level high-tech sectors are found to be the most concentrated, at the global level it is rather low and medium-low tech sectors. At the same time, firms in medium-high tech sectors are the least concentrated in both. As they are often referred to as the ’backbone’ of the German economy, we see potential implications for territorial cohesion and regional disparities.

Item Type: Thesis (PhD)
Additional Information: © 2017 David Nguyen
Library of Congress subject classification: H Social Sciences > HD Industries. Land use. Labor
Sets: Departments > Geography and Environment
Supervisor: Iammarino, Simona and Crescenzi, Riccardo

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