International taxation and the organizational form of foreign direct investment

Harald Johannes Amberger, Saskia Kohlhase

Research output: Contribution to journalArticleAcademicpeer-review

2 Citations (Scopus)


We investigate the relation between international taxation and the organizational form of foreign direct investment (FDI). Using micro-level data on inbound FDI relations in Germany, we find that a higher tax burden on income earned in a corporate subsidiary increases the probability that a multinational corporation (MNC) conducts foreign investment through a non-corporate flow-through. This effect is economically meaningful and varies with the relative importance of tax-motivated income shifting, a subsidiary’s non-tax benefits of limited liability and legal independence, and an MNC’s local knowledge. Moreover, we examine potential real effects of organizational form choices and document that affiliates established as flow-throughs exhibit a lower loss propensity and are less profitable than affiliates established as subsidiaries. Taken together, our findings inform policy makers about the potential response of MNCs to tax-law changes and suggest that the chosen organizational form can shape the future characteristics of investments abroad.
Original languageEnglish
Pages (from-to)1529-1561
Number of pages33
JournalJournal of International Business Studies
Issue number8
Publication statusPublished - Oct 2023

Bibliographical note

Funding Information:
We are grateful to the Research Data and Service Centre (RDSC) of the Deutsche Bundesbank for granting access to the Microdatabase Direct Investment (MiDi) 1999–2013 ( ) under Project Number 2015/0002. The data was accessed and analyzed via Controlled Remote Execution (CRE). We thank Alain Verbeke (editor-in-chief), Rosalie Tung (editor-in-chief), Jeong-Bon Kim (editor) and two anonymous reviewers for their insightful comments and constructive feedback. For their valuable comments, we also thank Kathleen Andries, Dan Collins, Eva Eberhartinger, Alex Edwards, Cristi Gleason, Ursa Kosi, Adrian Kubata, Thomas Lindner, Pete Lisowsky, Kevin Markle, Jon Medrano, Heeijin Ohn, Benjamin Osswald, Jochen Pierk, Alex Rathke, David Samuel, Thorsten Sellhorn, Steve Utke, Johannes Voget, Alfons Weichenrieder, Jacco Wielhouwer, Jaron Wilde, and participants at the 6th Conference on Current Research in Taxation in Bonn, the EAA Annual Congress 2017 in Valencia, and seminar participants at the University of Mannheim, Vienna University of Economics and Business, the Westfälische Wilhelms-Universität Münster, the University of Iowa, and the Erasmus University Rotterdam. Harald Amberger gratefully acknowledges financial support from the Austrian Science Fund (FWF): W 1235-G16.

Publisher Copyright:
© 2023, The Author(s).


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