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Heterogeneity and FDI : Evidence from German Firm-Level Data *

Recent theoretical work suggests that firm heterogeneity has an impact on the international investment decisions of multinational firms. This paper provides evidence foreign direct investment (FDI) at different levels of aggregation. We use a novel firm-level dataset on the FDI stocks of German firms to assess level and role of heterogeneity. Our data cover the years 1990-2000. We provide evidence on the patterns of FDI, on the size of the foreign affiliate, and on the number of affiliates per host country. Market size and geographic distance have a significant impact on FDI stocks. We also find evidence in favor of the hypothesis that heterogeneity with respect to the degree of internationalization of the reporting firm and the size of the foreign affiliate have an impact on investment decisions.