Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/128070
Authors: 
Harms, Philipp
Méon, Pierre-Guillaume
Year of Publication: 
2011
Series/Report no.: 
Working Paper, Study Center Gerzensee 11.10
Abstract: 
We explore the effect of foreign direct investment on economic growth in developing countries, distinguishing between mergers and acquisitions ("M&As") and "greenfield" investment. A simple model captures the key difference between the two types of FDI: unlike greenfield investment, M&As partly represent a rent accruing to previous owners, and do not necessarily contribute to expanding the host country's capital stock. The model suggests that greenfield FDI has a stronger impact on growth than M&A sales. This hypothesis is supported by our empirical results, which show that greenfield FDI enhances growth, while M&As have no effect, at best.
Subjects: 
Growth
foreign direct investment
mergers and acquisitions
greenfield investment
JEL: 
F21
F23
F43
O16
Document Type: 
Working Paper

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