The Role of Global Value Chains for German Manufacturing

Godart and Görg
Figure 6: Location of German foreign affiliates and the type of activities abroad
(2009)
Sources: Bureau von Djik, own calculations. A foreign affiliate is defined by an ownership of at least
10 percent by a German company. The definition of the groups is taken from EUROSTAT.
The figure suggests, for example, that Poland looks to be a source of intermediate
goods for German firms, as there is a relatively larger share of German affiliates in Poland
active in low-tech manufacturing than in the other countries. However, it also appears to
be a source of demand for German products, as there is a large share of German affiliates
in less knowledge intensive services, which includes wholesale trade and the distribution of
products in the foreign market. In the US, by contrast, there is a much higher share of
high tech manufacturing firms owned by German parents while in the UK, knowledge
intensive services look to take a higher share of German firms when compared to the four
other countries. Hence Germany seems to be involved in global value chains with
different countries but also with different stages of the production process within each
country.
In a last approach to measuring the importance of global value chains for German
manufacturing we use firm level information from a recent survey by the German
Statistical Office (Statistisches Bundesamt). It focuses specifically on firms relocating activities
abroad that were previously carried out in-house. This is, thus, a very direct (and perhaps
narrow) measure of offshoring, as it considers only production processes that were
previously undertaken within the firm. However, this survey provides a rich and unique
source of information to better understand the implications of foreign relocation.
Table 6 shows that 16.5 percent of the surveyed firms relocated one or more activities
abroad up to 2006. The last column also shows that around 10 percent of firms also plan
further relocations abroad in the coming years. The shares of actual and planned
relocations are higher in manufacturing, and specifically in technology intensive
manufacturing. It is also particularly high in large firms with more than 1000 employees.
This suggests that mainly skill and technology intensive larger firms are looking for
opportunities to relocate some of their activities abroad.
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