This study provides first comprehensive analyses of foreign-controlled enterprises in the
German service sector based on new micro data from official statistics. Various performance
measures were examined by comparing unconditional and conditional means and quantile
regression techniques were applied. Results reveal persistently superior performance for
foreign-controlled affiliates when compared to German-owned affiliates. In contrast, the
relationship for profitability is exactly the opposite. Labor productivity becomes insignificant
when the comparison group consists of domestically-owned affiliates with a high degree of
internationalization. A breakdown by country of origin shows that European affiliates pay
lower wages and export less compared to other foreign affiliates and that there is no
productivity advantage in favor of US firms like in manufacturing.
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