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UK direct investment in the United States: a mode of entry analysis

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  • Peter Nisbet
  • Wayne Thomas
  • Stuart Barrett
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    Abstract

    This article investigates the reasons underlying the high propensity of UK firms to directly invest in the United States via acquisition and merger. Using a binomial logit model, this study analyses data from 142 firms in five industrial sectors over the period 1984-1994. Together, these sectors account for more than 80% of UK foreign direct investment (FDI) in the sample period. The results highlight the role of diversification in explaining this behaviour. In contrast, the relative lack of evidence to support the role of exchange rates and leverage in influencing the decision to merge/acquire continues to fuel division as to the role of capital market imperfections in determining mode of entry.

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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal International Journal of the Economics of Business.

    Volume (Year): 10 (2003)
    Issue (Month): 3 ()
    Pages: 245-259

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    Handle: RePEc:taf:ijecbs:v:10:y:2003:i:3:p:245-259

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    Related research

    Keywords: Foreign Direct Investment; Mode of Entry;

    References

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    1. Brent D Wilson, 1980. "The Propensity of Multinational Companies to Expand Through Acquisitions," Journal of International Business Studies, Palgrave Macmillan, vol. 11(1), pages 59-64, March.
    2. Jean-François Hennart & Young-Ryeol Park, 1993. "Greenfield vs. Acquisition: The Strategy of Japanese Investors in the United States," Management Science, INFORMS, INFORMS, vol. 39(9), pages 1054-1070, September.
    3. J. Hatzius, 1997. "Foreign direct investment," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 20351, London School of Economics and Political Science, LSE Library.
    4. Gomes-Casseres, Benjamin, 1989. "Ownership structures of foreign subsidiaries : Theory and evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 11(1), pages 1-25, January.
    5. Walter Kuemmerle, 1999. "The Drivers of Foreign Direct Investment into Research and Development: An Empirical Investigation," Journal of International Business Studies, Palgrave Macmillan, vol. 30(1), pages 1-24, March.
    6. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, Elsevier, vol. 13(2), pages 187-221, June.
    7. John H Dunning, 1995. "Reappraising the Eclectic Paradigm in an Age of Alliance Capitalism," Journal of International Business Studies, Palgrave Macmillan, vol. 26(3), pages 461-491, September.
    8. Myers, Stewart C. & Majluf, Nicolás S., 1945-, 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Working papers 1523-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    9. Hennart, J.-F.M.A., 1989. "Transaction costs theory of equity joint ventures," Open Access publications from Tilburg University urn:nbn:nl:ui:12-175839, Tilburg University.
    10. Dunning, John H., 2000. "The eclectic paradigm as an envelope for economic and business theories of MNE activity," International Business Review, Elsevier, vol. 9(2), pages 163-190, April.
    11. Bruce Kogut & Harbir Singh, 1988. "The Effect of National Culture on the Choice of Entry Mode," Journal of International Business Studies, Palgrave Macmillan, vol. 19(3), pages 411-432, September.
    12. Stevens, Guy V. G., 1998. "Exchange Rates and Foreign Direct Investment: A Note," Journal of Policy Modeling, Elsevier, Elsevier, vol. 20(3), pages 393-401, June.
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    Cited by:
    1. Saliola, Federica & Zanfei, Antonello, 2009. "Multinational firms, global value chains and the organization of knowledge transfer," Research Policy, Elsevier, vol. 38(2), pages 369-381, March.
    2. Boateng, Agyenim & Hua, Xiuping & Uddin, Moshfique & Du, Min, 2014. "Home country macroeconomic factors on outward cross-border mergers and acquisitions: Evidence from the UK," Research in International Business and Finance, Elsevier, Elsevier, vol. 30(C), pages 202-216.
    3. Onur Koska, 2009. "Foreign Direct Investment For Sale," Working Papers, University of Otago, Department of Economics 0910, University of Otago, Department of Economics, revised Oct 2009.
    4. Uddin, Moshfique & Boateng, Agyenim, 2011. "Explaining the trends in the UK cross-border mergers & acquisitions: An analysis of macro-economic factors," International Business Review, Elsevier, vol. 20(5), pages 547-556, October.

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