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Author Buch, Claudia M. ♦ Kesternich, Iris ♦ Lipponer, Alexander ♦ Schnitzer, Monika
Source EconStor
Content type Text
Publisher Deutsche Bundesbank
File Format PDF
Language English
Subject Domain (in DDC) Social sciences ♦ Economics
Subject Keyword Multinational firms ♦ heterogeneity ♦ productivity ♦ financial constraints ♦ International Factor Movements and International Business ♦ Financial Institutions and Services
Abstract Recent literature on multinational firms has stressed the importance of low productivity as a barrier to the cross-border expansion of firms. But firms may also need external finance to shoulder the costs of entering foreign markets. We develop a model of multinational firms facing real and financial barriers to foreign direct investment (FDI), and we analyze their impact on the FDI decision (the extensive margin) and foreign affiliate sales (the intensive margin). We provide empirical evidence based on a detailed dataset of German multinationals which contains information on parent-level and affiliate-level financial constraints as well as about the location the foreign affiliates. We find that financial factors constrain firms’ foreign investment decisions, an effect felt in particular by large firms. Financial constraints at the parent level matter for the extensive, but less so for the intensive margin. For the intensive margin, financial constraints at the affiliate level are relatively more important.
ISBN 9783865585677
Part of series Discussion Paper Series 1: Economic Studies x2009,29
Learning Resource Type Article
Publisher Date 2009-01-01
Publisher Place Frankfurt a. M.
Rights Holder