Regional Policy and Greenfield Investments in German Districts

Abstract

Using data on greenfield investment in German districts from 2003 to 2010, we examine how regional development policies affect the decision of multinational corporations to locate facilities in Germany. We are interested in whether regional development policies accumulate to increase the attractiveness of a region and whether some policies are necessary to attract foreign investors. Applying count data models and geographic weighted regression, the results indicate that, on average, regional development policies increase the attractiveness of German districts for multinational firms. We find that place-based policies have the strongest effect on investments in the East German lagging regions. However, policies predominantly attract standardised types of investments that require considerable capital investments but not specialised location advantages.