Greenfield versus Merger & Acquisition FD: Same Wine, Different Bottles?

Ronald B. Davies, Rodolphe Desbordes, Anna Ray

Research output: Working paper

Abstract

Relying on a large foreign direct investment (FDI) transaction level dataset, unique both in terms of disaggregation and time and country coverage, this paper examines patterns in greenfield (GF) versus merger & acquisition (MA) investment. Although both are found to seek out large markets with low international barriers, important dif- ferences emerge. MA is more affected by geographic and cultural barriers and exhibits opportunistic behaviours as it is more sensitive to short-run changes, such as a currency crisis. On the other hand, GF is relatively driven by long-run factors, such as origin-country technological and institutional development or comparative advantage. These empirical facts are consistent with the conceptual distinction made between these two modes, i.e. MA involves transfer of ownership for integration or arbitrage reasons while GF relies on firms own capacities, which are linked to the origin countries attributes. They also suggest that GF and MA are likely to respond differently to policies intended to attract FDI.
LanguageEnglish
Number of pages48
Publication statusPublished - 4 Mar 2015

Publication series

NameG-MonD Working Paper
PublisherParis School of Economics

Fingerprint

Greenfield
Mergers
Wine
Foreign direct investment
Currency crises
Opportunistic behavior
Factors
Arbitrage
Disaggregation
Comparative advantage
Technological development
Short-run
Ownership
Institutional development

Keywords

  • foreign direct investment
  • mergers and acquisitions
  • greenfield investment
  • multinational firms

Cite this

Davies, R. B., Desbordes, R., & Ray, A. (2015). Greenfield versus Merger & Acquisition FD: Same Wine, Different Bottles? (G-MonD Working Paper).
Davies, Ronald B. ; Desbordes, Rodolphe ; Ray, Anna. / Greenfield versus Merger & Acquisition FD : Same Wine, Different Bottles?. 2015. (G-MonD Working Paper).
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Davies, RB, Desbordes, R & Ray, A 2015 'Greenfield versus Merger & Acquisition FD: Same Wine, Different Bottles?' G-MonD Working Paper.

Greenfield versus Merger & Acquisition FD : Same Wine, Different Bottles? / Davies, Ronald B.; Desbordes, Rodolphe; Ray, Anna.

2015. (G-MonD Working Paper).

Research output: Working paper

TY - UNPB

T1 - Greenfield versus Merger & Acquisition FD

T2 - Same Wine, Different Bottles?

AU - Davies, Ronald B.

AU - Desbordes, Rodolphe

AU - Ray, Anna

PY - 2015/3/4

Y1 - 2015/3/4

N2 - Relying on a large foreign direct investment (FDI) transaction level dataset, unique both in terms of disaggregation and time and country coverage, this paper examines patterns in greenfield (GF) versus merger & acquisition (MA) investment. Although both are found to seek out large markets with low international barriers, important dif- ferences emerge. MA is more affected by geographic and cultural barriers and exhibits opportunistic behaviours as it is more sensitive to short-run changes, such as a currency crisis. On the other hand, GF is relatively driven by long-run factors, such as origin-country technological and institutional development or comparative advantage. These empirical facts are consistent with the conceptual distinction made between these two modes, i.e. MA involves transfer of ownership for integration or arbitrage reasons while GF relies on firms own capacities, which are linked to the origin countries attributes. They also suggest that GF and MA are likely to respond differently to policies intended to attract FDI.

AB - Relying on a large foreign direct investment (FDI) transaction level dataset, unique both in terms of disaggregation and time and country coverage, this paper examines patterns in greenfield (GF) versus merger & acquisition (MA) investment. Although both are found to seek out large markets with low international barriers, important dif- ferences emerge. MA is more affected by geographic and cultural barriers and exhibits opportunistic behaviours as it is more sensitive to short-run changes, such as a currency crisis. On the other hand, GF is relatively driven by long-run factors, such as origin-country technological and institutional development or comparative advantage. These empirical facts are consistent with the conceptual distinction made between these two modes, i.e. MA involves transfer of ownership for integration or arbitrage reasons while GF relies on firms own capacities, which are linked to the origin countries attributes. They also suggest that GF and MA are likely to respond differently to policies intended to attract FDI.

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KW - mergers and acquisitions

KW - greenfield investment

KW - multinational firms

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Davies RB, Desbordes R, Ray A. Greenfield versus Merger & Acquisition FD: Same Wine, Different Bottles? 2015 Mar 4. (G-MonD Working Paper).