Asset Ownership and Foreign-Market Entry

45 Pages Posted: 23 Mar 2006

See all articles by Horst Raff

Horst Raff

Christian-Albrechts-Universitaet zu Kiel; CESifo (Center for Economic Studies and Ifo Institute); Kiel Institute for the World Economy

Michael John Ryan

Western Michigan University - Department of Economics

Frank Stähler

University of Tuebingen - Department of Economics; University of Adelaide - School of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: February 2006

Abstract

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

Raff, Horst and Ryan, Michael John and Stähler, Frank, Asset Ownership and Foreign-Market Entry (February 2006). CESifo Working Paper Series No. 1676, Available at SSRN: https://ssrn.com/abstract=892737

Horst Raff (Contact Author)

Christian-Albrechts-Universitaet zu Kiel ( email )

Institut fur Volkswirtschaftslehre
Wilhelm-Seelig-Platz 1
Kiel, 24098
Germany
+49-431-880-1582 (Phone)
+49-431-880-3150 (Fax)

HOME PAGE: http://www.wiso.uni-kiel.de/vwlinstitute/Raff/?page=raff

CESifo (Center for Economic Studies and Ifo Institute)

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Kiel Institute for the World Economy ( email )

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Michael John Ryan

Western Michigan University - Department of Economics ( email )

Kalamazoo, MI 49008
United States

Frank Stähler

University of Tuebingen - Department of Economics ( email )

Mohlstrasse 36
D-72074 Tuebingen, 72074
Germany

HOME PAGE: http://www.frank-staehler.de

University of Adelaide - School of Economics ( email )

Adelaide SA, 5005
Australia

CESifo (Center for Economic Studies and Ifo Institute) ( email )

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Munich, DE-81679
Germany

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