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What Drives Economic Growth? The Case of Cross-Border M&A and Greenfield FDI Activities

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Author Info

  • Miao Wang
  • M. C. Sunny Wong

Abstract

The effect of aggregate foreign direct investment (FDI) on economic growth remains uncertain in the literature. We revisit this FDI-Growth relation by analyzing the components of FDI - greenfield investment and cross-border mergers and acquisitions (M&As). Our analysis contributes to the existing literature by focusing on potentially heterogeneous growth effects of different FDI entry modes. Using a sample of 84 countries from 1987 to 2001, we separately examine the growth effects of greenfield investment and M&As. We find that greenfield investment and M&As have different impacts on economic growth. Greenfield investment promotes economic growth while M&As can be beneficial only when the host country has an adequate level of human capital. Our results provide support for receiving M&As when policymakers allocate more resources for human capital accumulation. Copyright 2009 Blackwell Publishing Ltd.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Kyklos.

Volume (Year): 62 (2009)
Issue (Month): 2 (04)
Pages: 316-330

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Handle: RePEc:bla:kyklos:v:62:y:2009:i:2:p:316-330

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0023-5962

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Cited by:
  1. Eckhardt Bode & Peter Nunnenkamp, 2011. "Does foreign direct investment promote regional development in developed countries? A Markov chain approach for US states," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 147(2), pages 351-383, June.
  2. Martin Falk, 2012. "Determinants of Greenfield Investment in Knowledge Intensive Business Services," FIW Research Reports series IV-002, FIW.
  3. Bogach, Olga & Noy, Ilan, 2012. "Fire-Sale FDI? The impact of financial crises on foreign direct investment," Working Paper Series 2089, Victoria University of Wellington, School of Economics and Finance.
  4. repec:wsr:ecbook:2010:i:iv-002 is not listed on IDEAS
  5. Martin Falk, 2013. "New empirical findings for international investment in intangible assets," WWWforEurope Working Papers series 30, WWWforEurope.
  6. Burger, Martijn J. & Ianchovichina, Elena I., 2014. "Surges and stops in FDI flows to developing countries : does the mode of entry make a difference ?," Policy Research Working Paper Series 6771, The World Bank.
  7. Quan Hoang Vuong & Tran Tri Dung & Thi Chau Ha NguyenN, 2009. "Mergers and Acquisitions in Vietnam’s Emerging Market Economy, 1990-2009," Working Papers CEB 09-045.RS, ULB -- Universite Libre de Bruxelles.
  8. Pradhan, Jaya Prakash, 2006. "Quality of Foreign Direct Investment, Knowledge Spillovers and Host Country Productivity: A Framework of Analysis," MPRA Paper 12336, University Library of Munich, Germany.
  9. Juraj Stančík, 2009. "FDI spillovers in the Czech Republic: takeovers vs. greenfields," European Economy - Economic Papers 369, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  10. JUDE, Cristina & LEVIEUGE, Gregory, 2013. "Growth effect of FDI in developing economies: The role of institutional quality," MPRA Paper 49321, University Library of Munich, Germany.

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