Cross-border mergers and acquisitions vs. greenfield foreign direct investment: The role of firm heterogeneity

Volker Nocke, Stephen Ross Yeaple

Research output: Contribution to journalArticle

188 Scopus citations

Abstract

We develop a general equilibrium model with heterogeneous firms to address two sets of questions: (1) what are the characteristics of firms that choose the various modes of foreign market access (exporting, greenfield FDI, and cross-border M&A), and (2) how does the international organization of production vary across industries and country-pairs? We show that the answers to these questions depend on the nature of firm heterogeneity. Depending on whether firms differ in their mobile or immobile capabilities, cross-border mergers involve the most or the least efficient active firms. The comparative statics on industry and country characteristics display a similar dichotomy.

Original languageEnglish (US)
Pages (from-to)336-365
Number of pages30
JournalJournal of International Economics
Volume72
Issue number2
DOIs
StatePublished - Jul 1 2007

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

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