Firm Productivity and the Foreign-Market Entry Decision

Horst Raff, Michael Ryan and Frank Stähler

No 2008-02, Economics Working Papers from Christian-Albrechts-University of Kiel, Department of Economics

Abstract: We use Japanese firm-level data to examine how a firm?s productivity affects its choice of foreign-market entry strategy. We study a sequence of decisions, starting with the choice between exporting and foreign direct investment (FDI). In the case of FDI, the firm faces two options: greenfield investment or merger and acquisition (M&A). If it selects greenfield investment, it has two ownership choices: whole ownership or a joint venture. Controlling for industry- and country-specific characteristics, we find that the more productive a firm is, the more likely it is to choose FDI rather than exporting, greenfield investment rather than M&A, and whole ownership rather than a joint venture. We also find that the assumed sequence of decisions fits the data better than alternative specifications.

Keywords: Foreign direct investment; merger and acquisition; joint venture; greenfield investment; firm heterogeneity; productivity (search for similar items in EconPapers)
JEL-codes: F12 F15 (search for similar items in EconPapers)
Date: 2008
New Economics Papers: this item is included in nep-bec, nep-com and nep-eff
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Citations: View citations in EconPapers (21)

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Related works:
Journal Article: Firm Productivity and the Foreign‐Market Entry Decision (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cauewp:7021

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