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Firm Productivity and the Foreign-Market Entry Decision

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Author Info
Raff, Horst
Ryan, Michael
Stähler, Frank

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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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Publisher Info
Paper provided by Christian-Albrechts-University of Kiel, Department of Economics in its series Economics Working Papers with number 2008,02.

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Date of creation: 2008
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Handle: RePEc:zbw:cauewp:7021

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Web page: http://www.wiso.uni-kiel.de/econ/

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Related research
Keywords: Foreign direct investment; merger and acquisition; joint venture; greenfield investment; firm heterogeneity; productivity;

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Find related papers by JEL classification:
F15 - International Economics - - Trade - - - Economic Integration
F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies

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  1. 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. [Downloadable!] (restricted)
  2. Stähler, Frank & Ryan, Michael & Raff, Horst, 2007. "Whole versus Shared Ownership of Foreign Affiliates," Economics Working Papers 2007,18, Christian-Albrechts-University of Kiel, Department of Economics. [Downloadable!]
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  3. Horst Raff & Michael Ryan, 2006. "Firm-Specific Characteristics and the Timing of Foreign Direct Investment Projects," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
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This page was last updated on 2009-11-22.

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