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Determinants of Different Modes of FDI: Firm-Level Evidence from Japanese FDI into the US

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  • Peiming Wang
  • Joseph Alba
  • Donghyun Park

Abstract

There are four major modes through which firms undertake foreign direct investment (FDI) – merger and acquisition (M&A), joint venture (JV), new plant (NP) and others (O). The four modes of FDI are distinct from each other, and each has its own unique advantages and disadvantages. While a large and growing empirical literature examines the determinants of FDI, very few studies examine the determinants of different modes of FDI. The central objective of this paper is to empirically analyze the extent to which the determinants of FDI such as firm size influences the choice of one mode of FDI over another. Our analysis follows a stylized two-stage investment process. First, we look at the probability of whether a Japanese firm is willing to undertake FDI in the US. Second, for firms that are willing to undertake FDI, we analyze which mode of FDI - i.e. M&A, joint venture, new plant or other FDI – they will undertake. The second stage is the innovation of this paper and its contribution to the FDI literature. Copyright Springer Science+Business Media New York 2013

Suggested Citation

  • Peiming Wang & Joseph Alba & Donghyun Park, 2013. "Determinants of Different Modes of FDI: Firm-Level Evidence from Japanese FDI into the US," Open Economies Review, Springer, vol. 24(3), pages 425-446, July.
    • Handle: RePEc:kap:openec:v:24:y:2013:i:3:p:425-446
    DOI: 10.1007/s11079-012-9244-6
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    Cited by:

    1. Matej Bule & Andrijana Cudina, 2020. "Foreign Direct Equity Investments and Foreign Ownership Premium: the Case of Croatia," Working Papers 58, The Croatian National Bank, Croatia.
    2. Alice Y. Ouyang & Ramkishen S. Rajan, 2017. "Impact of Terrorism on Cross-Border Mergers and Acquisitions (M&As): Prevalence, Frequency and Intensity," Open Economies Review, Springer, vol. 28(1), pages 79-106, February.
    3. Ying Wu & Xin Deng, 2022. "Macroeconomic Impacts of the US External Imbalances with Two Large Emerging Asian Economies: Japan (1970–1990) versus China (2000–2018)," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 64(2), pages 255-279, June.
    4. Burçak Polat & Cem Payaslıoğlu, 2016. "Exchange rate uncertainty and FDI inflows: the case of Turkey," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 23(1), pages 112-129, March.

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    More about this item

    Keywords

    FDI; Merger and acquisition; Joint venture; New plant; Multinomial logit model; F21; F23;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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