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Schwchen die Direktinvestitionen in MOE den heimischen Standort Ein Vergleich Deutschland sterreich

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Repatriation (advantageous for home country) or Reinvestment (advantageous for host country) ... Determinants of Profitability, Reinvestment and Repatriation ... – PowerPoint PPT presentation

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Title: Schwchen die Direktinvestitionen in MOE den heimischen Standort Ein Vergleich Deutschland sterreich


1
The Profitability of Austrian Foreign Direct
Investment Reinvestment or Repatriation? 4th
FIW Workshop Foreign Direct Investment- Determin
ants and Home Market Effects March 7th,
2008 Wilfried Altzinger University of
Economics and Business Administration,
Vienna altzing_at_wu-wien.ac.at
2
Profitability of Austrian Foreign Direct
Investment
  • Purpose of the Study
  • Determinants of Profitability
  • Empirical Evidence
  • Conclusions

3
Purpose of the Study
  • Austrian Outward FDI increased tremendously since
    1990
  • in particular in new and acceding EU members
    (CEECs)

4
Purpose of the Study
5
Purpose of the Study
6
Austrian Outward FDI increased tremendously
  • Mainly due to the opening-up of CEE
  • 2005 43.6 of FDI stock is located in CEE-19
    EU-15 (33.8)
  • Strong increase in CEE-14 (mainly in Croatia,
    Romania, Bulgaria and Russia mainly finance,
    trade and oil)
  • First-mover advantages!

7
Purpose of the Study
  • What are the implications on competitiveness,
    employment and income distribution?
  • Profitability
  • Repatriation (advantageous for home country) or
    Reinvestment (advantageous for host country)

8
II. Determinants of Profitability
  • Macroeconomic factors (Locational advantages)
  • Growth of host and export countries
  • Growth of export markets
  • Factor costs
  • Infrastructure and Taxes
  • Country risk
  • Competition policy and regulations
  • Firm-level (Ownership advantages)
  • Technological know-how
  • Managerial know-how
  • Advertising, marketing and distribution
  • Size Market power (CEEC/privatisation) costs of
    acquisitions
  • Experiences (learning process)
  • gt Productivity

9
II. Time-Specific Determinants of Profitability,
Reinvestment and Repatriation
Source Brada and Tomík, 2003
10
III. Empirical Evidence -What can be observed?
  • Profitability
  • time patterns
  • by countries
  • by age of investment
  • differences between MAs and Greenfield
  • Reinvestments/Repatriations

11
III. Empirical Evidence for Austria
  • Data source Austrian Central Bank
  • Firm data for the period 1992 to 2005
  • no direct access to data (due to confidentiality)
  • 2815 affiliates (2005) / 760 affiliates (1989)
  • 27 275 observations
  • (989 parent firms with more than 70.000 EUR
    investment)
  • Indicator of Profitability Net Earnings per
    Equity Capital Invested (Mean and Median)
  • Return on Equity (RoE)

12
III. Empirical Evidence for Austria
  • Mean of RoE
  • can be strongly biased by a few large (loss or
    profit) making firms
  • Median of RoE
  • can be calculated with firm level data only
  • provides a more general pattern of the
    development

13
Profitability All Regions
14
Profitability and Maturity
15
Profitability of Greenfield Investments and MAs
16
Differences of Profitability between MAs and
Greenfield Investments- MAs gt Greenfield-
Greenfield gt MAs
17
Profitability of Greenfield Investments and MAs
(for CEECs only)
Greenfield Mergers Acquisitions
18
Profitability of Greenfield Investments and MAs
(for EU only)
Greenfield Mergers Acquisitions
19
Repatriation or Reinvestment?
20
Repatriation or Reinvestment?
21
Different Repatriation Rates for MAs and
Greenfield Investments
22
IV. Conclusions
  • Total profitability has increased substantially
    over the period 1992 2005
  • Profitability of affiliates differ strongly
    between regions
  • CEE-14 gt CEE-5 gtgt EU-15
  • Age of investment is most important!
  • most investments became profitable after three to
    four years of investment
  • development for affiliates in CEE-14 seems to be
    favourable since they are young!
  • Different patterns of profitability between MAs
    and Greenfield investments by regions
  • EU-14 always higher profits for MAs
  • CEE Lower (higher) profits for Greenfield for
    younger (older) vintages gt longer starting-up
    problems but afterwards superior!

23
IV. Conclusions
  • Higher reinvestment in CEECs
  • Higher repatriation by older vintages
  • Higher repatriation of MAs
  • Possible explanations
  • to (re-)build and (re-)equip a production
    facility is more urgent in CEECs
  • better investment opportunities in CEECs
  • stronger financial needs for Greenfield
    investments

24
IV. Open Questions
  • We can offer a reasonable explanation on
    time-specific determinants of profitability,
    reinvestment and repatriation.
  • However, specific determinants of profitability
    are still missing
  • superior efficiency
  • market power issues
  • unit labour costs
  • differences by sectors
  • competition policies of host countries ...

25
Appendix I Empirical Evidence for Austria
  • Return on equity (RoE)
  • Net profit (excluding profits and losses carried
    forward by the year) divided by equity (minus
    profit or loss for that year)

26
Appendix II Empirical Evidence for Austria
  • CEE-5 Poland, Hungary, Slovenia, Slovak Republic
    and Czech Republic
  • CEE-14 Albania, Bosnia and Herzegovina,
    Bulgaria, Estonia, Croatia, Latvia, Lithuania,
    Moldavia, Romania, Russia, Serbia and Montenegro,
    Ukraine and Belarus

27
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