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Firm Productivity and the Foreign-Market Entry Decision

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  • Horst Raff
  • Michael Ryan
  • Frank Stähler

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. --

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File URL: http://hdl.handle.net/10.1111/j.1530-9134.2012.00346.x
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Bibliographic Info

Article provided by Wiley Blackwell in its journal Journal of Economics & Management Strategy.

Volume (Year): 21 (2012)
Issue (Month): 3 (09)
Pages: 849-871

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Handle: RePEc:bla:jemstr:v:21:y:2012:i:3:p:849-871

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Web page: http://www.kellogg.northwestern.edu/research/journals/JEMS/

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Cited by:
  1. Horst Raff & Michael Ryan & Frank Stähler, 2008. "Whole versus Shared Ownership of Foreign Affiliates," Kiel Working Papers 1433, Kiel Institute for the World Economy.
  2. James Markusen & Frank Stähler, 2011. "Endogenous market structure and foreign market entry," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 147(2), pages 195-215, June.
  3. Ryan, Michael & Raff, Horst, 2007. "Firm-Specific Characteristics and the Timing of Foreign Direct Investment Projects," Economics Working Papers 2007,22, Christian-Albrechts-University of Kiel, Department of Economics.
  4. Robert C. Feenstra, 2006. "New Evidence on the Gains from Trade," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 142(4), pages 617-641, December.
  5. Raff, Horst & Ryan, Michael & Stähler, Frank, 2009. "Whole vs. shared ownership of foreign affiliates," International Journal of Industrial Organization, Elsevier, vol. 27(5), pages 572-581, September.
  6. Görg, Holger & Mühlen, Henning & Nunnenkamp, Peter, 2010. "FDI liberalization, firm heterogeneity and foreign ownership: German firm decisions in reforming India," Proceedings of the German Development Economics Conference, Hannover 2010 35, Verein für Socialpolitik, Research Committee Development Economics.
  7. Mühlen, Henning & Görg, Holger & Nunnenkamp, Peter, 2010. "Firm Heterogeneity, Industry Characteristics and Types of FDI: The Case of German FDI in the Czech Republic," Open Access Publications from Kiel Institute for the World Economy 37268, Kiel Institute for the World Economy (IfW).
  8. Ignat Stepanok, 2012. "Cross-Border Mergers and Greenfield Foreign Direct Investment," Kiel Working Papers 1805, Kiel Institute for the World Economy.
  9. Frank Stähler, 2014. "Partial ownership and cross-border mergers," Journal of Economics, Springer, vol. 111(3), pages 209-237, April.

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