A study by vbw and IW Consult analyzes the internationalization strategies of Bavarian businesses.
Direct investment as key component of internationalization
The Bavarian economy is closely tied to other countries either through investment and production abroad or exports. Between 2013 and 2023 foreign investment grew at a pace of about 6 percent annually before slowing down in 2023 and 2024. With direct investment growing nearly twice as fast as exports the internationalization of Bavarian businesses was clearly driven by foreign direct investment. Protectionism is likely to support the continuation of this trend.
Different approaches for different regions
Foreign direct investment (FDI) by Bavarian businesses concentrated in regions outside Europe. About 61 percent of FDI goes there. The most important target market for Bavarian FDI are the US, accounting for 27.3 percent. The US market is traditionally accessed much more through FDI than through exports. This is increasingly true for China as well. For exports the inverse is true. They are largely concentrated on Europe and less so on the rest of the world.
Reactions to protectionism and a look to the future
Increasing protectionism is generally favoring foreign production by Bavarian companies. A survey of over 500 Bavarian companies suggests that US-protectionism is not having the desired effects. The survey suggests that tariff and non-tariff-barriers will likely make the USA less important as a destination for investment. The winners will be Europe and Asia – but not China.
