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

Volker Nocke; Stephen Yeaple

doi:10.1016/j.jinteco.2006.09.003

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

Volker Nocke
, Stephen Yeaple

Economics

Research output: Contribution to journal › Article › peer-review

293 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 language	English (US)
Pages (from-to)	336-365
Number of pages	30
Journal	Journal of International Economics
Volume	72
Issue number	2
DOIs	https://doi.org/10.1016/j.jinteco.2006.09.003
State	Published - Jul 2007

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

SDG 10 Reduced Inequalities

All Science Journal Classification (ASJC) codes

Finance
Economics and Econometrics

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10.1016/j.jinteco.2006.09.003

Cite this

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

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.",

author = "Volker Nocke and Stephen Yeaple",

note = "Funding Information: We gratefully acknowledge financial support by the National Science Foundation (grant SES-0422778) and the University of Pennsylvania Research Foundation. A previous version of this paper was circulated and presented under the title Mergers and the Composition of International Commerce. We would like to thank Bruce Blonigen, Bill Ethier, Matt Slaughter, and Scott Taylor for helpful comments. We would also like thank seminar participants at the University of Pennsylvania, the London School of Economics, Yale University, the University of Wisconsin, Penn State University, Iowa State University, Syracuse University, and the NBER ITI Winter Meetings in Stanford. Copyright: Copyright 2008 Elsevier B.V., All rights reserved.",

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doi = "10.1016/j.jinteco.2006.09.003",

language = "English (US)",

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AU - Yeaple, Stephen

N1 - Funding Information: We gratefully acknowledge financial support by the National Science Foundation (grant SES-0422778) and the University of Pennsylvania Research Foundation. A previous version of this paper was circulated and presented under the title Mergers and the Composition of International Commerce. We would like to thank Bruce Blonigen, Bill Ethier, Matt Slaughter, and Scott Taylor for helpful comments. We would also like thank seminar participants at the University of Pennsylvania, the London School of Economics, Yale University, the University of Wisconsin, Penn State University, Iowa State University, Syracuse University, and the NBER ITI Winter Meetings in Stanford. Copyright: Copyright 2008 Elsevier B.V., All rights reserved.

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N2 - 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.

AB - 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.

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

Abstract

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