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An FDI is an FDI is an FDI? The growth effects of greenfield investment and mergers and acquisitions in developing countries

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  • Harms, Philipp
  • Méon, Pierre-Guillaume

Abstract

We explore the effect of foreign direct investment (FDI) on economic growth in developing countries, distinguishing between mergers and acquisitions (M&As) and Greenfield investment. We find that these two types of FDI differ substantially with respect to their influence on growth. While Greenfield FDI substantially enhances growth, M&As have no effect, at best. We also demonstrate that, in contrast to Greenfield FDI, a larger volume of M&As results in an appreciated real exchange rate. The resulting loss in price competitiveness may explain the poor growth effect of the M&A variant of FDI. --

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Paper provided by Verein für Socialpolitik, Research Committee Development Economics in its series Proceedings of the German Development Economics Conference, Berlin 2011 with number 38.

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Date of creation: 2011
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Handle: RePEc:zbw:gdec11:38

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Keywords: Growth; foreign direct investment; mergers and acquisitions; green-field investments;

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