German Direct Investments in the Czech Republic ; Effects on Domestic Labor Markets

Kumulative Dissertation, Otto-Friedrich-Universität Bamberg, 2016

The economic integration of markets induces a broad variety of new conditions and opportunities for economic units. Multinational enterprises are key players in this regard. The increasing liberalization of trade and capital flows facilitates entries into foreign markets and international fragmentation of production processes. The effects of foreign direct investments (FDI) have yet to be fully investigated. The empirical literature on this subject conducted so far refers to selective databases, which underrepresent small and medium-sized parent companies and/or affiliates. This doctoral thesis makes an important contribution to the closure of gaps in the literature on labor market effects of FDI. Part of this dissertation is the establishment of a unique database that covers the total population of German affiliates in the Czech Republic and the corresponding parent companies. By developing a new method for linking firm-level data with the plant-level data of the Institute for Employment Research (IAB), this database is linked with the data of the Federal Employment Agency. Therefore, it permits reliable conclusions to be drawn regarding the impact of FDI in this specific case. As the exact dates of the investments in the Czech Republic are known, the employment trend of German firms with Czech affiliates and firms without FDI is compared to evaluate the effects on the German workforce. Moreover, this thesis provides profound insights into the types of FDI and the location of German parent companies and their Czech affiliates, which reveals new findings on cross-border firm linkages and the role of border regions.