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Gravity and multinational enterprise activity: Greenfield and M&A investment

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  • Duan, Yaohan
  • Suwanprasert, Wisarut

Abstract

We estimate a structural gravity model of multinational enterprise (MNE) activity, separating Greenfield from mergers and acquisitions (M&A) investment. Using bilateral sector-level data for 185 countries from 2010–2019, drawn from the MREID and the Dynamic Gravity Dataset, we show that distance imposes large barriers on both modes, with M&As typically more distance-sensitive. Cultural proximity, especially common language, has much stronger effects on M&A activity, whereas legal similarity and deep regulatory integration, particularly joint EU membership, disproportionately promote Greenfield investment. Historical ties generate asymmetric responses, and trade agreements affect the two modes in opposite ways, with FTAs encouraging Greenfield activity but reducing M&As. Bilateral investment treaties depress both modes, with consistently larger adverse effects for M&As. These results suggest distinct mechanisms underlying Greenfield versus M&A expansion.

Suggested Citation

  • Duan, Yaohan & Suwanprasert, Wisarut, 2026. "Gravity and multinational enterprise activity: Greenfield and M&A investment," Economics Letters, Elsevier, vol. 263(C).
    • Handle: RePEc:eee:ecolet:v:263:y:2026:i:c:s0165176526000911
    DOI: 10.1016/j.econlet.2026.112897
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    Keywords

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    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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