An International Comparison of FDI Entry Mode

Author Name SAITO Yukiko (Senior Fellow (Specially Appointed), RIETI) / TAKAYAMA Haruka (University of Virginia)
Creation Date/NO. July 2020 20-P-017
Research Project Dynamics of Inter-organizational Network and Firm Lifecycle
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There are two types of FDI entry modes. The first is greenfield FDI (i.e., an investing firm builds a new foreign affiliate), and the other is cross-border M&A or brownfield FDI (i.e., an investing firm acquires an existing local firm). We investigate how firms choose between entry modes and compare the choices of Japanese, US, German and Chinese firms. Our empirical analysis suggests that more productive Japanese firms choose cross-border M&A rather than greenfield FDI. This evidence contrasts with the existing literature, specifically, Nocke and Yeaple (2008), which suggests that more productive firms conduct greenfield FDI rather than cross-border M&A.