post thumbnail alt text

Frauke Steglich

Kiel Institute for the World Economy

Frauke Steglich is a Researcher at the Kiel Institute for the World Economy (IfW), Managing Director of the Poverty Reduction, Equity and Growth Network (PEGNet) at IfW, and Research Fellow at the Kiel Centre for Globalization (KCG). Her research interests lie in the field of empirical international economics and development, with a focus on foreign direct investment, global value chains, and corporate social responsibility.
More about Frauke Steglich ›
publication
Sustainable Global Supply Chains Report 2022

Global supply chains affect the economy, the environment and social welfare in many ways. Worldwide, economies are experiencing global supply shortages today, affecting key industries such as automotive and consumer electronics as well as vaccine and medical supplies industries. These preoccupy policymakers, who are debating independent national production capacities and restrictions on international trade, but also large companies, which consider reshoring production and abandoning just-in-time procurement. At the same time, the greening of the global economy requires a restructuring of global production to massively decrease its environmental footprint. This creates new supply chain challenges – how to move towards circular economies and how to reorient energy-intensive industries towards renewables and green hydrogen, for example. And let‘s not forget: Consumers are increasingly demanding higher social and environmental standards. Transparency requirements and binding due diligence obligations will in particular affect countries that export raw materials and labour-intensive goods produced under problematic environmental and social conditions. All of this calls for policies that shape global supply chains in accordance with globally agreed social and environmental objectives. Policies along these lines will have to balance the legitimate interests of different countries and they may easily fail to achieve their objectives unless they are firmly grounded in a thorough understanding of the respective structures in supply chains, including the power relations between the actors. Further, the economic, social and environmental effects of alternative policy options need to be well understood. Science can make an important contribution here, especially if it maintains a constant dialogue with politics and society. This is why the international “Research Network Sustainable Global Supply Chains” was initiated by the Federal Ministry for Economic Cooperation and Development (BMZ). It currently comprises about 100 internationally leading scientists from all over the world and is jointly coordinated by our four institutes. Its tasks are: To conduct and stimulate research that contributes to making supply chains more sustainable; and to collect and synthesize the best international research on this topic and make it accessible to policy makers and other societal actors. In addition to its own research, the network organises academic conferences and discussions with policymakers, organises a blog and produces podcasts. With this report – the first in a new annual series – we present new research highlights, provide a forum to debate controversial supply chain topics and identify policy-relevant research gaps for the network‘s future work. The report is, at the same time, an invitation to participate in the discussions on how investment, production and trade will be reorganized in a global economy that has to respond to geopolitical challenges.

Read more ›
publication
Corporate Social Responsibility along the Global Value Chain

Firms are under increasing pressure to meet stakeholders’ demand for Corporate Social Responsibility (CSR) along their global value chains. We study the incentives for and investments in CSR at different stages of the production process. We analyze a model of sequential production with incomplete contracts where CSR by independent suppliers differentiates the final product in the eyes of caring consumers. The model predicts an increasing CSR profile for suppliers along the value chain: from upstream suppliers with low CSR to downstream suppliers with higher CSR. We confirm this prediction using Indian firm-level data. We compute a firm’s value chain position combining product-level information in our data with the World Input-Output Database. We find that more downstream firms have higher CSR expenditures as measured by a combination of staff welfare spending and social community spending.

Read more ›
publication
Green gifts from abroad? FDI and firms' green management

Improvements of firms' environmental performance crucially determine the speed of a country's green economic transformation. In this paper, we investigate whether firms with foreign ownership are more likely to adopt 'green' management practices, which determine the capability to monitor and improve a firm's impact on the environment. By using multi-country firm-level data, we show that foreign ownership increases the likelihood of implementing green management practices. Considering country heterogeneity, we reveal that only firms based in more developed economies and in countries with better environmental performance benefit from foreign direct investment, while this is not the case for firms based in less developed economies or countries with weak environmental performance. In addition, we find that the effect is more robust for manufacturing sector firms than for service sector firms. Overall, our results suggest that foreign ownership can contribute towards a country's green economic transformation.

Read more ›
publication
Multilateral coordination and exchange for sustainable global value chains

While participation in global value chains (GVCs) is widely associated with benefits for countries’ development and growth, its environmental and social costs become increasingly evident. Representing core buyer and supplier countries in GVCs, the G20 is particularly suited to tackle this global challenge. We recommend the G20 should become a key global forum for exchange and collaboration on this important challenge, setting in place effective processes to ensure multilateral coordination for sustainable GVCs in the G20 and beyond.

Read more ›
publication
Foreign Direct Investment & Petty Corruption in Sub-Saharan Africa: An Empirical Analysis at the Local Level

Inspired by a recent and ongoing debate about whether foreign direct investment (FDI) represents a blessing for or an impediment to economic, social, and political development in FDI host countries this paper addresses two issues: Does the presence of foreign investors impact the occurrence of petty corruption? If so, what are the main underlying mechanisms? Geocoding an original firm-level dataset and combining it with georeferenced household survey data, this is a first attempt to analyse whether the presence of foreign investors is associated with changes in local corruption around foreign-owned production facilities in 19 Sub-Saharan African countries. Applying an estimation strategy that explores the spatial and temporal variation in the data, we find strong and consistent evidence that the presence of foreign firms increases bribery among people living nearby. When examining two potential channels, we find no clear support that FDI-induced economic activity leads to more corruption. In contrast, the results provide evidence that FDI affects corruption via norm transmission.

Read more ›
event
Fostering Inclusive and Sustainable Global Value Chains: The Role of the G20
Read more ›
video
Research Session: New Insights from Supply Chain Research
Read more ›
publication
Lagging behind? German Foreign Direct Investment in Africa

German Foreign Direct Investment (FDI) in Africa is lagging behind China, France, the Netherlands, the UK, the US, and other economies. It represented only 1 percent of the German total FDI stock abroad in 2018 and is concentrated in few African countries. Overall, around 850 German firms have roughly 200,000 employees on the African continent (as of 2017). Compared with the main sending countries, German FDI is more concentrated in manufacturing as opposed to the natural resources sector. Germany has engaged in various proactive policies to encourage FDI, including in Africa. For example, the Federal Government offers investment guarantees to German firms to cover political risks, which are often high in developing and emerging countries. German Chambers of Commerce abroad provide information on the local business environment, local investment opportunities and partners and thus aim to bridge information gaps often hindering FDI. More recently, new initiatives such as “German Desks” and “AfricaConnect” were introduced. They rely on private-public partnerships to facilitate access to local business opportunities but also to third markets in neighboring countries. Based on an analysis of German FDI in 115 countries since 2010, we confirm that German Chambers of Commerce are related to a higher German FDI stock in their country of location. Moreover, we find that German investment guarantees help to reduce negative effects of low institutional quality. They are nevertheless only a second best option as compared to improving the national institutional environment. This is particularly true in the African context if the goal is to increase significantly the number of German firms active on the continent. Recipient countries have also developed tools to attract FDI including “Investment Promotion Agencies” (IPAs) and “Special Economic Zones” (SEZs), aiming at compensating for weaknesses in the national business environment. While there is some evidence in the literature about IPAs as investment facilitators, the evidence is rather mixed concerning SEZs. In our analysis of German FDI, we do not find a significant correlation between the presence of SEZs and the German FDI stock.Assessing the impact of very recent initiatives such as the “German Desks” and “AfricaConnect” is less straightforward as they are still in their infancy. They have the potential to reduce costly information barriers to FDI. Nevertheless, their beneficial effect on German FDI may take time to materialize and depends strongly on a business friendly institutional environment and cross border openness between African countries to FDI and trade.

Read more ›
publication
Policy instruments for FDI promotion in Africa

Global foreign direct investment (FDI) has increased substantially over the past decades and so has FDI in Africa. However, still only 3 percent of global FDI stocks and 1 percent of German FDI is located in Africa. There are several policy instruments that can contribute to higher investment in developing countries. The Policy Brief outlines several important investment promotion instruments of both sender and recipient countries of FDI and assesses their impact.

Read more ›

Stay tuned on the latest news from our research network.