Good and bad FDI: The growth effects of greenfield investment and mergers and acquisitions in developing countries
Year: 2014
Type: preprint
Abstract: We explore the effect of foreign direct investment on economic growth in developing countries, distinguishing between mergers and acquisitions (“M&As”) and “greenfield” investment. A simple model underlines that, unlike greenfield investment, M&As partly represent a rent accruing to previous owners, and do not necessarily contribute to expanding the host country’s capital stock. Greenfield FDI should therefore have a stronger impact on growth than M&A sales. This hypothesis is supported by our empirical results, which show that greenfield FDI enhances growth, while M&As have no effect, at best, in a panel of up to 78 developing and emerging countries over 1987-2005.
Authors: Philipp Harms, Pierre‐Guillaume Méon
Language: English
Subfield: Strategy and Management
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W1559262618