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Greenfield or M&A? The Role of Economic Policy Uncertainty in Home and Host Countries

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  • Tiezhu Sun
  • Weiwei Zhang
  • Xiaobo Xu
  • Li Zhang

Abstract

This paper examines the impact of economic policy uncertainty in home and host countries on the choice of foreign establishment mode. Using 777 foreign subsidiary establishments made by Chinese firms from 2004 to 2015, we find that firms prefer M&A compared to greenfield investment as the establishment mode when the host country is experiencing high economic policy uncertainty. Firms that face high economic policy uncertainty in their home country prefer cross-border M&A when entering the host country. Economy policy uncertainty in the home country is the main factor when economic policy uncertainties in both the home and host countries are considered.

Suggested Citation

  • Tiezhu Sun & Weiwei Zhang & Xiaobo Xu & Li Zhang, 2021. "Greenfield or M&A? The Role of Economic Policy Uncertainty in Home and Host Countries," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 57(6), pages 1628-1639, May.
    • Handle: RePEc:mes:emfitr:v:57:y:2021:i:6:p:1628-1639
    DOI: 10.1080/1540496X.2021.1897003
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    Cited by:

    1. Qing Xie & Hua Yin, 2023. "Institutional Differences and the Choice of Outward Foreign Direct Investment Mode under the “Belt and Road” Initiative: Experience Analysis Based on China’s Manufacturing Enterprises," Sustainability, MDPI, vol. 15(9), pages 1-26, April.
    2. Li, Kun-Sha & Xiong, Yong-Qing, 2022. "Host country’s environmental uncertainty, technological capability, and foreign market entry mode: Evidence from high-end equipment manufacturing MNEs in emerging markets," International Business Review, Elsevier, vol. 31(1).

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