Greenfield Fdi vs. Mergers and Acquisitions: Does the Distinction Matter?
FDI flows to developing countries surged in the 1990s, to become their leading source of external financing. This rise in FDI volume was accompanied by a marked change in its composition: investment taking the form of acquisition of existing assets (M&A) grew much more rapidly than investment in mainly new assets (‘greenfield’ FDI), particularly in countries undertaking extensive privatization of public enterprises. This raises two issues. First, is the M&A boom a one-time effect of privatization, or is it likely to be followed by a rise in greenfield investment? Second, do these two types of FDI have different macroeconomic consequences – in terms of aggregate investment and growth? This paper focuses on establishing the stylized facts in terms of time precedence between both types of FDI, investment and growth using data for a large sample of industrial and developing countries. We find that in developing and industrial countries higher M&A is typically followed by higher greenfield investment, while the reverse is true only for industrial countries. In developing economies domestic investment leads both types of FDI, but not the reverse; while in industrial countries, domestic investment leads M&A FDI but is led by greenfield FDI. Neither type of FDI appears to precede economic growth in either developing or industrial countries, but FDI does respond positively to increases in the growth rate.
|Date of creation:||Aug 2002|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (562) 670 2000
Fax: (562) 698 4847
Web page: http://www.bcentral.cl/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Robert E. Lipsey, 2000. "Interpreting Developed Countries' Foreign Direct Investment," NBER Working Papers 7810, National Bureau of Economic Research, Inc.
- Orazio P. Attanasio & Lucio Picci & Antonello E. Scorcu, 2000. "Saving, Growth, and Investment: A Macroeconomic Analysis Using a Panel of Countries," The Review of Economics and Statistics, MIT Press, vol. 82(2), pages 182-211, May.
When requesting a correction, please mention this item's handle: RePEc:chb:bcchwp:173. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Claudio Sepulveda)
If references are entirely missing, you can add them using this form.