Cross-border mergers and greenfield foreign direct investment

Abstract

"This paper presents a model of international trade and foreign direct investment (FDI), where FDI is comprised of greenfield FDI and mergers and acquisitions (M&A). In a monopolistically competitive environment merging firms do not reduce competition. Mergers are motivated by efficiency gains and transfer of technology. Following empirical evidence, greenfield investors are modeled as more productive than M&A firms, which are in turn more productive than exporters. The model has two symmetric countries and generates two-way flows of both M&A and greenfield FDI. Trade liberalization makes more firms choose greenfield FDI over M&A and leads to lower productivity and welfare." (Author's abstract, IAB-Doku) ((en))

Cite article

Stepanok, I. (2015): Cross-border mergers and greenfield foreign direct investment. In: Review of International Economics, Vol. 23, No. 1, p. 111-136. DOI:10.1111/roie.12157