A surge in German investment into North and South Carolina underscores how historical and migratory ties help shape companies’ internationalisation strategies, and the power of clusters of companies from the same countries in attracting new foreign firms. 

The Carolinas have long-been magnets for German FDI, but fDi Markets data shows they moved up a notch by collectively attracting 27% of Germany’s record $15bn-worth of announced FDI into the US last year. Both states benefit from business-friendly regulations, advanced research institutions and strong air connectivity, but US FDI professionals emphasise that the region’s centuries-old ties to Germany are also factors at play. 

“There’s a very strong correlation between the places in these states that the FDI is going to, and the places that received historical German migration,” says Tarek Hassan, a Boston University professor who studies the link between FDI and immigration. 

The 10 counties that have attracted the lion’s share of German investment into both states since 2003 have a high number of residents with German ancestry — up to 12% in Gaston County and 10% in Laurens County — according to Boston University analysis. This aligns with research co-led by Mr Hassan which, based on 130 years of US immigration, shows that areas that received more migrants from a given country were significantly more likely to receive FDI from that same country long into the future. 

The foundations of the Carolinas’ German ancestry were laid in the 1700s by the many immigrants who landed in Philadelphia and travelled south to eventually settle in the two states. North Carolina’s biggest city, Charlotte, is named after a German-born queen and its home county, Mecklenburg, after the namesake German region. These ties increased in the 1960s with the arrival of German machinery businesses to support South Carolina’s textile industry, and again in the 1990s when BMW chose Spartanburg for its first full-assembly facility overseas and started sending personnel to the state. 

“The fact that there have been centuries of relationships between those cultures is very important” in helping attract German business, says John Lummus, president of Upstate SC Alliance. The region’s German heritage — evident through cultural organisations, schools’ exchange and language programmes, and even its breweries — have helped make businesses feel comfortable investing. That is down in part to companies wanting their businesses and workers to thrive in a place they feel at home. 

“If you are sending an expat somewhere, do you want to send them, or their spouse, somewhere in remote locations where they have no cultural ties or connections?” asks Matthias Hoffmann, president of the German American Chamber of Commerce’s (GACC) southern chapter. Across GACC’s 11 southern states, he has observed that “where there are German ties and communities, there’s usually a connection to more German companies locating there”. 

Both Carolinas have adopted an apprenticeship system, similar to that used in Germany for the past century. Sarah White, vice president at Global Location Strategies, recalls one German firm being “very attracted” to North Carolina’s programme. “It’s a good forum [for] commonality on things they look at from a workforce perspective,” she says. 

More on migration and FDI:

• Non-EU worker migration surges in central and eastern Europe
• Opinion | Immigration policy limits the US's manufacturing boom
• How refugees help foster foreign investment

Business first

There are more than 400 German companies in North Carolina, and more than 200 in South Carolina, according to government statistics. These include iconic names such as BMW, whose Spartanburg plant catalysed South Carolina’s automotive industry, Bosch, Daimler-Mercedes Benz and Schaeffler.

The firms driving last year’s record volumes include Volkswagen, whose Scout Motors’ announced a $2bn electric vehicle facility near Columbia, and magnetic product manufacturer VAC, which will build a $500m facility in Sumter County. Sizeable projects announced this year include Schott’s $371m glass manufacturing plant in Wilson County. 

Large operations by multinationals perpetuate the FDI-migration link, thanks to the arrival of workers, their families and suppliers. The business ecosystem they create can help attract further investment. “It’s daunting to be a first-time investor in the US,” said Christopher Chung, CEO of the Economic Development Partnership of North Carolina. “To the extent you can be close to other companies from the same part of the world that have also set up shop, that shortens the learning curve.”

But he and Mr Hoffmann agree that these ecosystems and cultural ties are more influential for smaller businesses than established multinationals. For firms of all size, “there still has to be a business case for being here,” says Mr Chung. “But we can gain an advantage by talking [up] some more intangible connections. That’s always very important for us to do.”

Do you want more FDI stories delivered directly to your inbox? Subscribe to our newsletters.