Scandinavian Working Papers in Economics

SSE/EFI Working Paper Series in Economics and Finance,
Stockholm School of Economics

No 0731: Cross-Border Mergers and Greenfield Foreign Direct Investment

Ignat Stepanok ()
Additional contact information
Ignat Stepanok: Kiel Institute for the World Economy, Postal: Hindenburgufer 66, D-24105 Kiel, Germany

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

JEL-codes: F12; F23; O41

43 pages, First version: November 22, 2010. Revised: October 16, 2013. Earlier revisions: November 29, 2010, November 14, 2012.

Full text files

hastef0731.pdf PDF-file Full text

Download statistics

Questions (including download problems) about the papers in this series should be directed to Helena Lundin ()
Report other problems with accessing this service to Sune Karlsson ().

This page generated on 2018-01-27 00:01:38.