German Multinationals Research Articles

The role of foreign MNEs in China’s twin transition: a study on the organization of green and digital innovation processes

PurposeThe purpose of this study is to shed light on the twin transition in China in the organization of innovation processes in artificial intelligence (AI) and green technology (GT) development and to understand the role of foreign multinationals in Chinese innovation systems.Design/methodology/approachA qualitative research approach is used by interviewing executives from German multinationals with expertise in AI and GT development and organization of innovation processes in China. In total, 11 semi-structured interviews were conducted with companies, and the data were analysed with a thematic qualitative text analysis.FindingsThe findings show that AI applications for GT are primarily developed in cross-company projects that are led by local and regional authorities through the organization of industrial districts and clusters. German multinationals are either being integrated, remaining autonomous or being excluded from these twin transition innovation processes.Originality/valueThis paper aims to fill the gap in the literature by providing one of the first qualitative approach towards twin transition innovation processes in China and exploring the integration of multinational enterprises in cluster organizations. To the best of the author’s knowledge, this is one of the first twin transition studies from this perspective in emerging economies.

Corporate profit shifting and the role of tax havens: Evidence from German country-by-country reporting data

This paper is the first to use information from individual country-by-country (CbC) reports to assess the extent of profit shifting by multinational enterprises. Unlike other data often used to evaluate the extent of profit shifting and tax avoidance, CbC reports provide a complete coverage of the global distribution of profits and indicators of economic activity for multinationals exceeding a certain revenue threshold. We show that 82% of the German multinationals subject to CbC reporting have tax haven subsidiaries and that these subsidiaries are notably more profitable than those in non-havens. However, only 9% of the global profits of German multinationals are reported in tax havens. Results from regression analysis suggest that approximately 40% of the profits reported in tax havens are a result of tax-induced profit shifting. The associated annual tax base loss for Germany amounts to EUR 5.4 billion, corresponding to 4.3% of the profits reported by these firms in Germany. This implies a tax revenue loss of EUR 1.6 billion per year.

The tax-efficient use of debt in multinational corporations

Affiliates of multinationals borrow a considerable amount from their parent company, even when the parent is located in a high-tax country. This is at odds with standard theories of a tax-efficient capital structure. We set up a model that analyzes the functioning of the internal capital market and investigates the trade-off between tax savings and capital market frictions within the group. We test the model on data of the universe of German multinationals. The empirical analysis largely supports our model in that: (i) smaller multinationals often rely on parental debt financing; (ii) larger multinationals are more likely to use internal banks; (iii) parental debt and external debt are substitutes and the mix depends on the relative cost of raising capital through the parent and the affiliates; (iv) local and within-group tax incentives play an important role in determining all three types of debt.

Study shows companies need to take into account value changes of blue-collar Chinese workers

PurposeThe authors wanted to find out if workers' values had changed compared with previous generations. This is a vital issues for HRM departments who need to know how to keep their workers from moving elsewhere.Design/methodology/approachThe author conducted semi-structured interviews into the work values of Chinese blue-collar workers. The interviewees were 25 employees at German multinationals in the auto-making industry in Shanghai. There were 17 blue-collar workers and eight white-collar managers. The blue-collar interviews focused on personal demographics, perceptions of the job and company, attitude toward work, goals in life, main reasons to quit and incentives offered to stay. The white-collar interviews were more focused on managerial issues.FindingsThe authors concluded that HRM systems should be adapted to meet the preferences of the employees. Companies needed to take into account the value changes of blue-collar Chinese workers. Interviewee comments also revealed that, although pay was still important, career development had become more significant for some workers.Originality/valueThe author said her paper could help talent managers to get the best out of their employees. In particular, if HRM processes were improved it would reduce voluntary employee turnover, a major problem for employers.

A Cross-Cultural Comparison of Conflict Management Styles in Multinational Organisations: Empirical Evidence from Serbia

This study explores the conflict management styles of German and Serbian managers in multinational organisations in Serbia. Contrary to most previous cross-cultural studies on conflict management styles, we have analysed not only the impact of the dimensions of individualism vs. collectivism on conflict management styles, but the effect of power distance dimension also. Moreover, none of the previous studies have analysed the conflict of management styles of managers in Southeast Europe, let alone the influence of intercultural interactions in multinational organisations in that region. Our study is based on the survey of 205 German, and 214 Serbian, managers in German multinationals in Serbia. The findings reveal that German and Serbian managers use different conflict management styles and that the status of the conflict partners and gender affect managers’ conflict management styles.

International Debt Shifting: The Value-Maximizing Mix of Internal and External Debt

We study the capital structure of multinationals and expand previous theory by incorporating international debt tax shield effects from both internal and external capital markets. We show that: (i) multinationals’ firm value is maximized if both internal and external debt are used to save tax; (ii) the use of internal and external debt is independent of each other; and (iii) multinationals have a tax advantage over domestic firms, which cannot shift debt across international borders. We test our model using a large panel of German multinationals and find that internal and external debt shifting are of about equal importance.

Geopolitical jockeying: Economic nationalism and multinational strategy in historical perspective

Research SummaryWe explore multinational strategy formation in the context of rising economic nationalism. Specifically, we examine how firms develop strategies to capitalize on the historical and aspirational attributes of national identity. Analyzing the histories of two German multinationals in late colonial India, we find that these firms engaged in “geopolitical jockeying” to delegitimize rival multinationals and position themselves as complementary to the economic and political goals of the host nation. Toward that end they employed “aspirational political practices,” addressing the inherently future‐oriented character of nationalism, and invested in the development of political capabilities to gather information and shape perceptions of national contexts. The paper contributes to a more robust conceptualization of nations and nationalism and their role in the formation of international competition and strategy.Managerial SummaryRising economic nationalism can create political and economic opportunities as well as threats for multinational firms. Through a historical analysis of the emerging strategy of two German companies—Siemens and Bayer—in late colonial India, we show how firms can engage in “geopolitical jockeying” to delegitimize rival multinationals and position themselves as complementary to the economic and political goals of host nations. To do so the companies engaged in “aspirational political practices,” addressing the inherently future or goal‐oriented aspects of nations, and created political capabilities designed to both gather intelligence on and shape the nationalist movements. The paper uses history as a mirror for reflecting on the causes and consequences of economic nationalism for international strategy in our own time.

International Debt Shifting: The Value Maximizing Mix of Internal and External Debt

We study the capital structure of multinationals and expand previous theory by incorporating international debt tax shield effects from both internal and external capital markets. We show that: (i) multinationals' firm value is maximized if both internal and external debt are used to save tax; (ii) the use of internal and external debt is independent of each other; (iii) multinationals have a tax advantage over domestic firms, which cannot shift debt across international borders. We test our model using a large panel of German multinationals and find that internal and external debt shifting are of about equal importance.

Business beyond Empire: German Multinationals in Pre- and Post-Independence India (1890s–1960s)

ABSTRACTThe activities of multinationals in India have so far been described as a British–Indian story. However, the British Empire was never an impenetrable economic area, but, rather, a contact zone for firms of many different origins. This article diversifies the historiography of Indian business history by tracing the commercial interactions between Germany and India from the 1890s to the 1960s as one example of non-British multinationals. It shows continuities in actors, debates and strategies and across major political turning points. In particular, it highlights the alignment of aspirations between Germans and nationalistic Indians as a coalition against British dominance.

Internment as a business challenge: Political risk management and German multinationals in Colonial India (1914–1947)

Internment in so-called ‘enemy countries’ was a frequent occurrence in the twentieth century and created significant obstacles for multinational enterprises (MNEs). This article focuses on German MNEs in India and shows how they addressed the formidable challenge of the internment of their employees in British camps during both the First and the Second World War. It finds that internment impacted business relationships in India well beyond its endpoint and that the First World War internment shaped the subsequent perception of and strategic response to the Second World War experience. It is shown that internment aggravated existing staffing challenges, impacted on the perception of racial lines of distinctions and re-cast the category ‘European business’. While internment was perceived and managed as a political risk, the case also shows that it created unexpected networking opportunities, generating a tight community of German businesspeople in India.

Distance and the Multinational Wage Premium

Combining administrative data on German workers with commercial data on German firms, we find evidence for a distance effect on the multinational wage premium: Foreign multinationals pay lower wages than German multinationals if the ultimate owner is located in close proximity to Germany, whereas the opposite is true if the ultimate owner is located further away. In addition to this so far unexplored effect, our results confirm previous evidence that on average foreign multinationals and domestic multinationals pay wages of similar size, with both types of firms paying a premium relative to other local firms. To provide a rationale for this pattern, we develop a theoretical model in which wages are firm-specific and firms can serve the foreign market via exporting or via FDI. In case of FDI, they face uncertainty about the wages to be paid abroad, and due to this uncertainty, firms that pay high wages at home are more likely to seek foreign investment. In the model, the observed distance effect on the multinational wage premium occurs since the alternative of exporting is less attractive for distant locations, and firms are therefore more willing to accept higher wages for foreign production in locations that are further away from their headquarters.

Countering Political Risk in Colonial India: German Multinationals and the Challenge of Internment (1914-1947)

Internment in so-called “enemy countries” was a frequent occurrence in the twentieth century and created significant obstacles for multinational enterprises (MNEs). This article focuses on German MNEs in India and shows how they addressed the formidable challenge of the internment of their employees in British camps during both WWI and WWII. We find that internment impacted business relationships in India well beyond its endpoint and that the WWI internment shaped the subsequent perception of and strategic response to the WWII experience. We show that internment aggravated existing staffing challenges, impacted the perception of racial lines of distinctions and re-casted the category “European business.” While internment was perceived and managed as a political risk, the case also shows that it created unexpected networking opportunities, generating a tight community of German business people in India.

The Tax-Efficient Use of Debt in Multinational Corporations

Some multinationals use the parent company as a lender to the group, whereas others set up an internal bank in a low tax jurisdiction. This paper discusses the link between capital structure choices and tax planning motives in multinational groups. We model the trade-off between the use of external debt, parental debt and an internal bank. We test the theory model using data on the universe of German multinationals. The empirical analysis largely supports our model in that: (i) smaller firms often rely on parental debt financing; (ii) larger multinationals are more likely to use internal banks; (iii) parental debt and external debt are substitutes and the mix depends on the relative cost of raising capital through the parent and the affiliates; (iv) both parental debt and external debt increase when the tax rate increases, all else equal.

Does exist a way to Manage HR in Portugal? An Analysis from German Multinationals HRM Practices.

Multinationals have operating problems due to the multiple contexts in which they operate. One of the greatest challenges for these organizations is the management of the cultural diversity of their human resources, in the sense of creating a collective of work capable of meeting the goals of the new economy. In Portugal, of the most represented countries at the level of their multinationals, Germany is the one that has a more antagonistic culture when compared with Portuguese culture, not preventing a multiplicity of successful cases. This paper firstly aims to characterize the HRM practices used in the Portuguese subsidiaries of the German multinationals and to see if there is a pattern in these same practices, trying to find out the "how" German companies manage with productivity the Portuguese human capital. The results dictated the existence of a pattern used in practices and a clear focus on human resources, identified by a clear approach to HRM soft model, without neglecting the importance of achieving the goals, improving empowerment, knowledge, skills and motivation.

Location choice of German multinationals in the Czech Republic

AbstractThis paper analyzes the location choice of German investors in the Czech Republic based on a unique dataset covering all Czech companies with a German equity holder. Using a nested logit approach the impact of agglomeration economies, labour market conditions and distance on location choice is investigated. The main result of the paper is that apart from a low distance to the location of the parent company the attractiveness of a Czech district for German investors is mainly driven by agglomeration economies. Besides localization economies the agglomeration of German companies in a region plays a decisive role. The importance of labour market characteristics differs between investment sectors, sizes and periods.

Corporate social responsibility: model in Germany

The article focuses on the concept of corporate social responsibility research in Germany. In the world practice the concept of corporate social responsibility of business has become synonymous to the concept of an effective and transparent business with sustainability effects. Corporate social responsibility is considered as the ability of an organization or an enterprise to evaluate the consequences of their actions for sustainable social development. German multinationals have more positive public image, enhance a modal of profitability, and show the benefits of corporate investments in society. Presenting the challenges and perspectives of corporate social responsibility the authors examine the current state and future directions of the development of German multinationals. The aim of the article is to define the typical features of the model of corporate social responsibility in Germany and proposes its application for Ukrainian companies. The theoretical section includes economic analysis of the methods and tools of German multinationals. The authors prove that the analysis of the basic features of German corporate social responsibility model can be applied for emerging economies in order to ensure competitiveness, high level of productivity and profitability. The institutions of corporate social responsibility can be used to address critical economic, social and environmental issues, and to act in favor of the development of the national economy. The authors emphasize the necessity of qualitative changes in the institutional environment that will promote entrepreneurial activities and economic growth.

Corruption for sales

This paper investigates the impact of corruption on foreign affiliates’ sales of German multinationals that differ in their level of experience in the foreign market. We exploit the panel dimension of a detailed firm-level dataset to show that more experienced firms are less likely to suffer from the costs related to corruption. Controlling for persistent and unobserved factors at the country and firm levels, we show that corruption reduces unambiguously the sales of new entering firms, while having no impact on the sales of incumbents.

Book Review: Closed Frontiers. Why German multinationals don’t utilise the European Works Council Directive

Book Review: Closed Frontiers. Why German multinationals don’t utilise the European Works Council Directive

Regional determinants of German FDI in the Czech Republic: new evidence on the role of border regions

ABSTRACTRegional determinants of German FDI in the Czech Republic: new evidence on the role of border regions. Regional Studies. Using a unique dataset, the regional distribution of German multinationals and their Czech affiliates is analysed. The investigation focuses on locational factors for joint foreign direct investment (FDI) projects that can only be revealed by taking a home-host country perspective. A light is shed on the strong position of the common border region and its asymmetric interconnectedness. While the Czech border region constitutes an attractive target area for investors from all over Germany, multinational firms in the German border region show a significant preference to invest in Czech regions close by, but not so in the non-border regions in the neighbouring country.

Corporate social responsibility mandates within German multinational enterprises in Sub-Saharan Africa

Multinational enterprises operating in Sub-Saharan Africa (SSA) exist within an environment marked by complexity, inequality and socio-economic challenges, yet also sustained economic growth. This research focuses on how German multinationals define a Corporate Social Responsibility (CSR) mandate that is relevant to the local context and responds to the demands of stakeholders in their host countries within SSA. We find that the broad CSR mandate is defined at headquarters but that it contains a discretionary and a non-discretionary component. This is to ensure that, while global standards are adhered to, the local CSR engagements remain relevant and impactful. CSR in SSA tends to focus on activities that aim for long-term development which indicates a high level of local embeddedness and recognition of the meaningful impact that CSR can have in developing countries. We find that, organisationally, subsidiaries can extend their autonomy in pursuing CSR by building capacities that can be leveraged in the corporations globally. The study contributes to our understanding of multinationals operating in emerging markets and adapting to unique environments, and more specifically to CSR engagement in developing countries.