 The choice of market entry mode: Greenfield investment, M&A and joint ventureHorst Raff, Michael Ryan and Frank Stähler International Review of Economics & Finance, 2009, vol. 18, issue 1, 3-10 Abstract: Multinationals may enter a host market by different modes of foreign direct investment (FDI). This paper examines the choice of FDI mode, and shows that the profitability of greenfield investment influences this choice not only directly, but also indirectly since it determines the outside option of potential acquisition targets and joint venture partners. In particular, even if greenfield investment is a viable option, the multinational may prefer a joint venture to M&A, and M&A to greenfield investment, provided that M&A and joint venture both involve sufficiently low fixed costs. The reason is that the profitability of greenfield investment both reduces the acquisition price in the case of M&A, and gives local firms an incentive to agree to a joint venture. Keywords: F12; F23; Foreign; direct; investment; Multinational; firms; Merger; and; acquisition; Joint; venture; Greenfield; investment (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:18:y:2009:i:1:p:3-10 Access Statistics for this article International Review of Economics & Finance is currently edited by H. Beladi and C. Chen More articles in International Review of Economics & Finance from Elsevier |
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