What Drives Economic Growth? The Case of Cross-Border M&A and Greenfield FDI Activities

Authors

Miao Wang, Marquette UniversityFollow
M. C. Sunny Wong, University of San FranciscoFollow

Document Type

Article

Language

eng

Format of Original

15 p.

Publication Date

2009

Publisher

Wiley

Source Publication

Kyklos

Source ISSN

0023-5961

Abstract

The effect of aggregate foreign direct investment (FDI) on economic growth remains uncertain in the literature. We revisit this FDI–Growth relation by analyzing the components of FDI – greenfield investment and cross-border mergers and acquisitions (M&As). Our analysis contributes to the existing literature by focusing on potentially heterogeneous growth effects of different FDI entry modes. Using a sample of 84 countries from 1987 to 2001, we separately examine the growth effects of greenfield investment and M&As. We find that greenfield investment and M&As have different impacts on economic growth. Greenfield investment promotes economic growth while M&As can be beneficial only when the host country has an adequate level of human capital. Our results provide support for receiving M&As when policymakers allocate more resources for human capital accumulation.

Comments

Kyklos, Volume 62, Issue 2, pp 316-330 (April, 2009). DOI.

Recommended Citation

Wang, Miao and Wong, M. C. Sunny, "What Drives Economic Growth? The Case of Cross-Border M&A and Greenfield FDI Activities" (2009). Economics Faculty Research and Publications. 108.
https://epublications.marquette.edu/econ_fac/108