Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/56317
Authors: 
Stepanok, Ignat
Year of Publication: 
2010
Series/Report no.: 
SSE/EFI Working Paper Series in Economics and Finance 731
Abstract: 
I present a model of international trade and foreign direct investment (FDI), where FDI is comprised of greenfield FDI and mergers and acquisitions (M&A). Working in a monopolistically competitive environment, merging firms do not reduce competition. Mergers are motivated by efficiency gains and transfer of technology and expertise. Following empirical evidence, I model greenfield investors as the more productive group relative to M&A firms. The model has two symmetric countries and generates two-way flows of both M&A and greenfield FDI. Greater proximity to a market makes more firms choose greenfield FDI over M&A when investing there. Empirical evidence supports this result.
Subjects: 
Foreign direct investment
Mergers
Greenfield
Firm heterogeneity
JEL: 
F12
F23
O41
Document Type: 
Working Paper

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