Cross-Border Mergers and Greenfield Foreign Direct Investment

Stepanok, Ignat

Cross-Border Mergers and Greenfield Foreign Direct Investment

No 731, SSE/EFI Working Paper Series in Economics and Finance from Stockholm School of Economics

Abstract: I present a model of international trade and foreign direct investment (FDI), where FDI is comprised of greenfield FDI and mergers and acquisitions (M&A). Working in a monopolistically competitive environment, merging firms do not reduce competition. Mergers are motivated by efficiency gains and transfer of technology and expertise. Following empirical evidence, I model greenfield investors as the more productive group relative to M&A firms. The model has two symmetric countries and generates two-way flows of both M&A and greenfield FDI. Greater proximity to a market makes more firms choose greenfield FDI over M&A when investing there. Empirical evidence supports this result.

Keywords: Foreign direct investment; Mergers; Greenfield; Firm heterogeneity (search for similar items in EconPapers)
JEL-codes: F12 F23 O41 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2010-11-22, Revised 2013-10-16
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Cross-border Mergers and Greenfield Foreign Direct Investment (2015)
Working Paper: Cross-border mergers and Greenfield foreign direct investment (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:hastef:0731

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