Does Foreign direct investment mode choice affect the value of the investing firm?

Myeong-Hyeon Cho

Global Economic Review, 1998, vol. 27, issue 4, 3-19

Abstract: This study provides direct evidence of the effect of foreign direct investment-mode choice (acquisitions vs. joint ventures) on the value of the investing firm. Evidence shows that joint ventures, on average, tend to be a value-creating investment mode when firms make initial investments in new foreign countries. On the other hand, acquisitions tend to be, on average, a value-creating investment mode when firms make subsequent investments in countries where they have operating experiences. The findings, consistent with previous research regarding the relation between mode choice and long-run performance of the ventures in foreign host countries, suggest that the strategic choice of investment mode is critical to creating value for investing firm.

Date: 1998
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DOI: 10.1080/12265089808449743

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