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The New Agenda for FDI: Evidence from South Korea and Germany

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  • Gilroy, Bernard Michael
  • Lukas, Elmar

Abstract

The purpose of this study is to find reasonable explanations why cross-border acquisitions of foreign firms are often the preferred strategy to enter new markets. Furthermore, we formalize the choice of market entry strategy for an individual multinational enterprise (MNE) from a dynamic perspective. It is argued that, incorporating a suitable treatment irreversibility, uncertainty and flexibility related to an MNEs invetsment decision will show, that future investment opportunities play an important role when it comes to deciding whether to enter the new market via greenfield or acquisition. We also briefly discuss stylized facts given evidence from South Korea and Germany.

Suggested Citation

  • Gilroy, Bernard Michael & Lukas, Elmar, 2002. "The New Agenda for FDI: Evidence from South Korea and Germany," MPRA Paper 17970, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:17970
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    File URL: https://mpra.ub.uni-muenchen.de/17970/1/MPRA_paper_17970.pdf
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    References listed on IDEAS

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    1. Peter J Buckley & Mark C Casson, 1998. "Models of the Multinational Enterprise," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 29(1), pages 21-44, March.
    2. Nunnenkamp, Peter, 2001. "Foreign direct investment in developing countries: What policymakers should not do and what economists don't know," Kiel Discussion Papers 380, Kiel Institute for the World Economy (IfW).
    3. Andersson, Thomas & Svensson, Roger, 1994. " Entry Modes for Direct Investment Determined by the Composition of Firm-Specific Skills," Scandinavian Journal of Economics, Wiley Blackwell, vol. 96(4), pages 551-560.
    4. Alan J. Auerbach & Kevin Hassett & Joel Slemrod, 1993. "Taxation and Foreign Direct Investment in the United States: A Reconsideration of the Evidence," NBER Chapters,in: Studies in International Taxation, pages 119-148 National Bureau of Economic Research, Inc.
    5. Bruce Kogut, 1991. "Joint Ventures and the Option to Expand and Acquire," Management Science, INFORMS, vol. 37(1), pages 19-33, January.
    6. Myers, Stewart C., 1977. "Determinants of corporate borrowing," Journal of Financial Economics, Elsevier, vol. 5(2), pages 147-175, November.
    7. Jamuna Agarwal, 1980. "Determinants of foreign direct investment: A survey," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 116(4), pages 739-773, December.
    8. Berkovitch, Elazar & Narayanan, M. P., 1993. "Motives for Takeovers: An Empirical Investigation," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 28(03), pages 347-362, September.
    9. Mutinelli, Marco & Piscitello, Lucia, 1998. "The entry mode choice of MNEs: an evolutionary approach," Research Policy, Elsevier, vol. 27(5), pages 491-506, September.
    10. Sarianna Lundan & John Hagedoorn, 2001. "Alliances, Acquisitions and Multinational Advantage," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 8(2), pages 229-242.
    11. Kogut, Bruce & Chang, Sea Jin, 1996. "Platform Investments and Volatility Exchange Rates: Direct Investment in the U.S. by Japanese Electronic Companies," The Review of Economics and Statistics, MIT Press, vol. 78(2), pages 221-231, May.
    12. William H Davidson, 1980. "The Location of Foreign Direct Investment Activity: Country Characteristics and Experience Effects," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 11(2), pages 9-22, June.
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    Cited by:

    1. Gilroy, Bernard Michael & Lukas, Elmar, 2004. "Optionen der Internationalisierung: Motive ausländischer Direktinvestitionen in einem neuen Licht
      [Options of internationalisation: motives for foreign direct invetsment in a new light]
      ," MPRA Paper 21539, University Library of Munich, Germany.

    More about this item

    Keywords

    Foreign Direct Investment; multinational enterprise; sequential investments; entry mode; greenfield investments; cross-border acquisitions;

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • F2 - International Economics - - International Factor Movements and International Business

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