Abstract

http://ssrn.com/abstract=1945584
 
 

References (17)



 
 

Citations (1)



 


 



FDI Policy, Greenfield Investment and Cross‐Border Mergers


Larry D. Qiu


Hong Kong University of Science & Technology - Department of Economics

Shengzu Wang


International Monetary Fund (IMF) - Asia and Pacific Department

November 2011

Review of International Economics, Vol. 19, Issue 5, pp. 836-851, 2011

Abstract:     
This paper examines a multinational's choice between greenfield investment and cross‐border merger when it enters another country via foreign direct investment (FDI) and faces the host country's FDI policy. Greenfield investment incurs a fixed plant setup cost, whereas the foreign firm obtains only a share of the joint profit from a cross‐border merger under the restriction of the FDI policy. This trade‐off is affected by market demand, cost differential, and market competition, among other things. The host country's government chooses its FDI policy to affect (or alter) the multinational's entry mode to achieve the maximum social welfare for the domestic country. We characterize the conditions shaping the optimal FDI policy and offer intuitions on FDI patterns in developing and developed countries.

Number of Pages in PDF File: 16

Accepted Paper Series


Date posted: October 18, 2011  

Suggested Citation

Qiu, Larry D. and Wang, Shengzu, FDI Policy, Greenfield Investment and Cross‐Border Mergers (November 2011). Review of International Economics, Vol. 19, Issue 5, pp. 836-851, 2011. Available at SSRN: http://ssrn.com/abstract=1945584 or http://dx.doi.org/10.1111/j.1467-9396.2011.00984.x

Contact Information

Larry Dongxiao Qiu (Contact Author)
Hong Kong University of Science & Technology - Department of Economics ( email )
Clear Water Bay
Kowloon, Hong Kong
China
HOME PAGE: http://www.bm.ust.hk/~larryqiu/
Shengzu Wang
International Monetary Fund (IMF) - Asia and Pacific Department ( email )
700 19th Street NW
Washington, DC 20431
United States
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