Analysing Foreign Market Entry: The Choice between Greenfield Investment and Acquisitions

Holger Görg

Economics Technical Papers from Trinity College Dublin, Economics Department

Abstract: This paper formalises the choice a firm has to face when entering a foreign market via FDI as between setting up an entirely new plant (greenfield investment) or acquiring an existing indigenous firm. Our results show that in an asymmetric duopoly situation a new entrant will normally be best off by acquiring an existing indigenous low-technology firm, thus, forming a duopoly with an indigenous high-technology firm. While in welfare terms the entry of the foreign firm damages the country in most cases, there exist some possibilities that welfare, particularly after a greenfield investment by the foreign firm, is higher than before entry, even when there is full profit repatriation.

JEL-codes: F23 L13 (search for similar items in EconPapers)
Date: 1998-01
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:tcd:tcduet:981

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