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Asset Ownership and Foreign-Market Entry

Author

Listed:
  • Horst Raff
  • Michael Ryan
  • Frank Stähler

Abstract

This paper examines the link between a firm’s ownership of productive assets and its choice of foreign-market entry strategy. We find that, controlling for industry- and country-specific characteristics, the most productive firms (i.e., those owning the most assets) will enter through greenfield investment, less productive ones will choose M&A, and the least productive ones will export. In addition, the most productive firms are shown to prefer whole ownership to a joint venture. These predictions are confirmed in an econometric analysis of Japanese firm-level data.

Suggested Citation

  • Horst Raff & Michael Ryan & Frank Stähler, 2006. "Asset Ownership and Foreign-Market Entry," CESifo Working Paper Series 1676, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_1676
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    References listed on IDEAS

    as
    1. Mihir A. Desai & C. Fritz Foley & James R. Hines Jr., 2002. "International Joint Ventures and the Boundaries of the Firm," NBER Working Papers 9115, National Bureau of Economic Research, Inc.
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    4. Sang-Seung Yi, 1998. "Endogenous Formation of Joint Ventures with Efficiency Gains," RAND Journal of Economics, The RAND Corporation, vol. 29(3), pages 610-631, Autumn.
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    6. Bjorvatn, Kjetil, 2004. "Economic integration and the profitability of cross-border mergers and acquisitions," European Economic Review, Elsevier, vol. 48(6), pages 1211-1226, December.
    7. Sourafel Girma & Richard Kneller & Mauro Pisu, 2005. "Exports versus FDI: An Empirical Test," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 141(2), pages 193-218, July.
    8. Elhanan Helpman & Marc J. Melitz & Stephen R. Yeaple, 2004. "Export Versus FDI with Heterogeneous Firms," American Economic Review, American Economic Association, vol. 94(1), pages 300-316, March.
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    12. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," Review of Economic Studies, Oxford University Press, vol. 70(2), pages 317-341.
    13. Horn, Henrik & Persson, Lars, 2001. "The equilibrium ownership of an international oligopoly," Journal of International Economics, Elsevier, vol. 53(2), pages 307-333, April.
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    Citations

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    Cited by:

    1. Caterina Giannetti & Nicola Jentzsch & Giancarlo Spagnolo, 2010. "Information Sharing and Cross-border Entry in European Banking," CEIS Research Paper 178, Tor Vergata University, CEIS, revised 21 Dec 2010.
    2. Lehner, Maria, 2009. "Entry mode choice of multinational banks," Journal of Banking & Finance, Elsevier, vol. 33(10), pages 1781-1792, October.
    3. Beladi, Hamid & Chakrabarti, Avik & Marjit, Sugata, 2013. "Cross-border mergers in vertically related industries," European Economic Review, Elsevier, vol. 59(C), pages 97-108.
    4. Mugele, Christian & Schnitzer, Monika, 2008. "Organization of multinational activities and ownership structure," International Journal of Industrial Organization, Elsevier, vol. 26(6), pages 1274-1289, November.
    5. Nilsson Hakkala, Katariina & Bertrand, Olivier & Norbäck, Pehr-Johan & Persson, Lars, 2008. "Should RD Champions be Protected from Foreign Takeovers?," Discussion Papers 459, VATT Institute for Economic Research.
    6. Raff, Horst & Ryan, Michael & Stähler, Frank, 2009. "The choice of market entry mode: Greenfield investment, M&A and joint venture," International Review of Economics & Finance, Elsevier, vol. 18(1), pages 3-10, January.
    7. Ornella Tarola & Jean Gabszewicz & Didier Laussel, 2011. "To Acquire, or To Compete? An Entry Dilemma," Journal of Industry, Competition and Trade, Springer, vol. 11(4), pages 369-383, December.
    8. Onur Koska, 2009. "Foreign Direct Investment For Sale," Working Papers 0910, University of Otago, Department of Economics, revised Oct 2009.
    9. Tarola, Ornella, 2013. "Acquisition vsus de novo entry: A theoretical appraisal," Research in Economics, Elsevier, vol. 67(2), pages 179-188.
    10. Bertrand, Olivier & Ivaldi, Marc, 2006. "European Competition Policy in International Markets," IDEI Working Papers 419, Institut d'Économie Industrielle (IDEI), Toulouse.
    11. Lehner, Maria, 2008. "Entry Mode Choice of Multinational Banks," Discussion Papers in Economics 8222, University of Munich, Department of Economics.

    More about this item

    Keywords

    foreign direct investment; merger and acquisition; joint venture; greenfield investment; firm heterogeneity; productivity;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F15 - International Economics - - Trade - - - Economic Integration

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