German Foreign Direct Investment in Iran

Anna-Laura Seifermann

Student thesis: Master thesis

Abstract

The lifting of the sanctions in Iran opened up the market for investors from all over the world. As
Iran has an automotive industry with a lot of potential, the pioneering automotive companies from
Germany got a good opportunity to finally enter the market. The
In this thesis, I analyse how German automotive companies overcome institutional challenges when
they enter the Iranian market. The philosophy of this project is positivist and a qualitative deductive
approach is applied. The methods applied are the institutional theory and hypotheses testing; the
hypotheses are based on the existing literature and the background of the lifting of the sanctions.
The data used for the analysis was primary data collected through an interview and relevant
secondary data.
The analysis of the institutional context identified challenges of both, formal and informal nature.
These challenges derive from the political and legal system, bureaucratic processes, religious and
cultural differences and institutional voids such as “dovreh” and “party-baazi”.
In the hypotheses testing, all hypotheses are confirmed: The investments of German automotive
companies are impacted by uncertainties. Furthermore, in the Iranian market German automotive
companies face a high liability of foreignness. In order to overcome institutional barriers, German
investors try to establish partnerships with Iranian business partners. Finally, when German
automotive companies decide to enter the market, they are mostly planning to do so as latemovers.
The implications are that the future of investments depends on the political relations between Iran
and the US and German automotive companies can hardly influence these dynamics. Furthermore,
as other foreign automotive companies are already entering the market, it is crucial to keep up with
them and at least consider smaller investments that are not that risky. Finally, it can be beneficial to
already establish partnerships with Iranian business partners now even without investment, to have
a positive long-term perspective when entering the Iranian market.

EducationsMSc in Business, Language and Culture - Business and Development Studies, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2017
Number of pages73
SupervisorsMichael W. Hansen