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Christian-Albrechts-Universität zu Kiel

Institut für Volkswirtschaftslehre - Department of Economics
Economics Working Papers

Economics Working Papers: Abstract 2008-02


Nummer

2008-02

Autoren

Horst Raff, Michael Ryan, Frank Stähler

 

Titel

 

Firm Productivity and the Foreign-Market Entry Decision
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.

Keywords: Foreign direct investment, merger and acquisition, joint venture, greenfield investment, firm heterogeneity, productivity

JEL classification: F12, F15

 

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