An FDI is an FDI is an FDI? The growth effects of greenfield investment and mergers and acquisitions in developing countries

Philipp Harms and Pierre-Guillaume Méon

No 38, Proceedings of the German Development Economics Conference, Berlin 2011 from Verein für Socialpolitik, Research Committee Development Economics

Abstract: We explore the effect of foreign direct investment (FDI) on economic growth in developing countries, distinguishing between mergers and acquisitions (M&As) and Greenfield investment. We find that these two types of FDI differ substantially with respect to their influence on growth. While Greenfield FDI substantially enhances growth, M&As have no effect, at best. We also demonstrate that, in contrast to Greenfield FDI, a larger volume of M&As results in an appreciated real exchange rate. The resulting loss in price competitiveness may explain the poor growth effect of the M&A variant of FDI.

Keywords: Growth; foreign direct investment; mergers and acquisitions; green-field investments (search for similar items in EconPapers)
JEL-codes: F21 F23 F43 O16 (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-fdg
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Citations: View citations in EconPapers (12)

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Working Paper: An FDI is an FDI is an FDI? The growth effects of greenfield investment and mergers and acquisitions in developing countries (2011)
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