The discrepancies of determinants between cross-border M&A and greenfield FDI: evidence in emerging countries

Abstract

Cross-border M&A and Greenfield FDI have been a common strategy when a firm intends to participate in new markets. Those two strategies are FDI mode choice and represent a notable alternative for the expansion plan. Both Greenfield FDI and Cross-border M&A play an important role in economic growth in the host country. Therefore, this empirical research works on the determinants of home firm decision based on two main respects. This study estimates the determinants affective those two decisions. Then, this research also provides the empirical evidence of the discrepancies of those determinants affecting Cross-border M&A and Greenfield FDI. The observations are collected from emerging countries as host firms and use United States firms as home firms. This research presents four results. Firstly, host countries’ macroeconomic determinants between Cross-border M&A and Greenfield FDI have the similar effect. Secondly, an enhancement of IPR protection law in the host countries will increase inward Greenfield FDI, while SHR protection law supports cross-border M&A decision. Thirdly, firm level determinants have a strong impact on Cross-border M&A decisions. Finally, macroeconomic determinants have a positive effect on Greenfield FDI decisions.