Cross-border mergers and greenfield foreign direct investment

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: SSE/EFI Working Paper Series in Economics and Finance ; No. 731

Classification and Topics

• Classification: Wirtschaft ; Models of Trade with Imperfect Competition and Scale Economies; Fragmentation ; Multinational Firms; International Business ; One, Two, and Multisector Growth Models
• Subject: Foreign direct investment ; Mergers ; Greenfield ; Firm heterogeneity ; Direktinvestition ; Übernahme ; Internationale Markteintrittsstrategie ; Multinationales Unternehmen ; Monopolistischer Wettbewerb ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Stepanok, Ignat
• Event: Veröffentlichung
• (who): Stockholm School of Economics, The Economic Research Institute (EFI)
• (where): Stockholm
• (when): 2010

Further information

• Handle: http://hdl.handle.net/10419/56317
• Last update: 10.03.2025, 11:42 AM CET