Asset Ownership and Foreign-Market Entry
45 Pages Posted: 23 Mar 2006
Date Written: February 2006
This paper examines the link between a firm's ownership of productive assets and its choice of foreign-market entry strategy. We find that, controlling for industry - and country-specific characteristics, the most productive firms (i.e., those owning the most assets) will enter through greenfield investment, less productive ones will choose M&A, and the least productive ones will export. In addition, the most productive firms are shown to prefer whole ownership to a joint venture. These predictions are confirmed in an econometric analysis of Japanese firm-level data.
Keywords: foreign direct investment, merger and acquisition, joint venture, greenfield investment, firm heterogeneity, productivity
JEL Classification: F12, F15
Suggested Citation: Suggested Citation