The effects of greenfield investment and M&As on domestic investment in developing countries

Abstract

This article examines the effects of greenfield investment and M&As on domestic investment using panel data for 100 developing countries for the period 2003 to 2011. It is shown that while cross-border M&As do not have a significant effect on domestic investment, greenfield FDI has a large crowding-out effect.

Keywords:

• greenfield FDI
• cross-border M&As
• domestic investment

JEL Classification:

• E22
• F21
• F23

Notes

¹ The data are available at http://unctad.org/en/pages/DIAE/World%20Investment%20Report/Annex-Tables.aspx

² The data are available at http://data.worldbank.org/data-catalog/world-development-indicators

³ The data are available at http://info.worldbank.org/governance/wgi/index.aspx#home

⁴ Fixed- and random-effects estimates are very similar. Since the Hausman test rejects the random effects assumption at the 5% level, we only report the former.