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Title:Firm Productivity and the Foreign-Market Entry Decision PDF Logo
Authors:Raff, Horst
Ryan, Michael
Stähler, Frank
Issue Date:2008
Series/Report no.:Economics working paper / Christian-Albrechts-Universität Kiel, Department of Economics 2008,02
Abstract:We use Japanese firm-level data to examine how a firm?s productivity affects its choice of foreign-market entry strategy. We study a sequence of decisions, starting with the choice between exporting and foreign direct investment (FDI). In the case of FDI, the firm faces two options: greenfield investment or merger and acquisition (M&A). If it selects greenfield investment, it has two ownership choices: whole ownership or a joint venture. Controlling for industry- and country-specific characteristics, we find that the more productive a firm is, the more likely it is to choose FDI rather than exporting, greenfield investment rather than M&A, and whole ownership rather than a joint venture. We also find that the assumed sequence of decisions fits the data better than alternative specifications.
Subjects:Foreign direct investment
merger and acquisition
joint venture
greenfield investment
firm heterogeneity
productivity
JEL:F15
F12
Document Type:Working Paper
Appears in Collections:Economics Working Papers, Department of Economics, CAU Kiel

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