Cross-Border Mergers and Acquisitions vs. Greenfield Foreign Direct Investment: The Role of Firm Heterogeneity.

Journal article

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.

Authors: Nocke, V; Yeaple, S

• Publisher: Elsevier
• Journal: Journal of International Economics
• Volume: 72
• Issue: 2
• Pages: 336 - 365
• Publication date: 2007-07-01
• DOI: 10.1016/j.jinteco.2006.09.003
• ISSN: 0022-1996
• Language: English