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The Impact of FDI, Cross Border Mergers and Acquisitions and Greenfield Investments on Economic Growth

Author

Listed:
  • Paula Neto

    () (ISCA, Universidade de Aveiro)

  • António Brandão

    (Faculdade de Economia, Universidade do Porto)

  • António Cerqueira

    () (Faculdade de Economia, Universidade do Porto)

Abstract

This paper investigates whether aggregate foreign direct investment (FDI), cross border mergers and acquisitions (M&A) and greenfield investments affects economic growth based on a panel data of 53 countries over the period 1996-2006. Both causality tests and single growth equations are applied to examine this relationship. The evidence suggests that there is bidirectional causality between FDI, M&A and growth. We can also conclude that economic growth Granger causes greenfields, but the reverse is not true. The estimation of the growth equation leads us to conclude that FDI through greenfield investments exerts a positive impact on economic growth in both developed and developing countries. Oppositely, M&A has a negative effect on the economic growth of developing countries, but insignificant on developed countries.

Suggested Citation

  • Paula Neto & António Brandão & António Cerqueira, 2008. "The Impact of FDI, Cross Border Mergers and Acquisitions and Greenfield Investments on Economic Growth," FEP Working Papers 291, Universidade do Porto, Faculdade de Economia do Porto.
  • Handle: RePEc:por:fepwps:291
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    File URL: http://www.fep.up.pt/investigacao/workingpapers/08.09.12_wp291.pdf
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    References listed on IDEAS

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    2. Nair-Reichert, Usha & Weinhold, Diana, 2001. " Causality Tests for Cross-Country Panels: A New Look at FDI and Economic Growth in Developing Countries," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 63(2), pages 153-171, May.
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    Cited by:

    1. Eldin Mehic & Sabina Silajdzic & Vesna Babic-Hodovic, 2013. "The Impact of FDI on Economic Growth: Some Evidence from Southeast Europe," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 49(S1), pages 5-20, January.
    2. repec:eur:ejesjr:72 is not listed on IDEAS
    3. repec:mes:emfitr:v:52:y:2016:i:4:p:904-922 is not listed on IDEAS
    4. Sabina Silajdzic & Eldin Mehic, 2016. "Absorptive Capabilities, FDI, and Economic Growth in Transition Economies," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 52(4), pages 904-922, April.
    5. Eldin Mehic & Sabina Silajdzic & Vesna Babic-Hodovic, 2013. "The Impact of FDI on Economic Growth: Some Evidence from Southeast Europe," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 49(S1), pages 5-20, January.
    6. Nicola Cortinovis & Riccardo Crescenzi & Frank van Oort, 2018. "Multinational enterprises, industrial relatedness and employment in European regions," Papers in Evolutionary Economic Geography (PEEG) 1802, Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography, revised Jan 2018.

    More about this item

    Keywords

    Foreign Direct Investment; Cross Border Mergers and Acquisitions; Greenfield Investments; Economic Growth;

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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