Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/26339
Authors: 
Brakman, Steven
Garita, Gus
Garretsen, Harry
van Marrewijk, Charles
Year of Publication: 
2008
Series/Report no.: 
CESifo working paper 2294
Abstract: 
Most FDI takes place between the developed countries, which suggests that the market-seeking motive is important for understanding FDI. However, given the stylized fact that trade barriers (e.g. transportation costs and financial barriers) have declined over the past 20 years, models that aim to explain market-seeking FDI tend to predict a decline in FDI. Neary (2008) offers two explanations for this puzzle: (1) the export platform motive (where firms gain access to an integrated market by investing in one of the integrated countries); (2) Neary's (2007) GOLE model, which explains cross-border mergers and acquisitions (this model is of interest since most FDI comes in the form of M&As). By using a gravity framework, where we also deal with the zero gravity problem , we confirm the predictions of the GOLE model.
Subjects: 
cross-border M&As
financial openness
economic integration
JEL: 
F10
F12
F15
F36
F37
F41
G34
L13
Document Type: 
Working Paper

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