The Performance of Foreign Affiliates in German Manufacturing: Evidence from a new Database

This study presents the first investigation into the performance of foreign-controlled enterprises in German manufacturing, based on new micro-data from official statistics. A comprehensive set of performance variables is examined, not only by comparing unconditional mean values but also by accounting for other determinants and differences across distributions. The analysis reveals a foreign ownership performance premium with regard to productivity, research and development, export intensities, and average wages. Only profitability seems not to differ from German-owned enterprises. Results are verified by varying comparison groups of indigenous firms and separating for high- and low-tech sectors. Furthermore, a breakdown by country of origin and type of group head shows considerable heterogeneity within the group of foreign-controlled affiliates in Germany.