The Impact of FDI, Cross Border Mergers and Acquisitions, and Greenfield Investments on Economic Growth

• Type: Article in International Scientific Journal
• Date: 2010

Authors

Neto, Paula (Author) FEP; Brandão, António (Author) FEP; Cerqueira, António (Author) FEP

Journal

Title: IUP Journal of Business Strategy

Vol. 7 No. 4

Pages: 24-44

ISSN: 0972-9097

Publisher: IUP Publications

Indexing

EBSCO

Scientific classification

FOS: Social sciences > Economics and Business

Other information

Resumo (PT): This paper investigates whether aggregate Foreign Direct Investment (FDI), cross-border Mergers and Acquisitions (M&A) and greenfield investments affect economic growth, based on a panel data of 53 countries over the period 1996-2006. Both causality tests and single growth equations are applied to examine this relationship. The evidence suggests that there is bidirectional causality between FDI, M&A and growth. It also suggests that economic growth Granger causes greenfields, but the reverse is not true. The estimation of the growth equation leads us to conclude that FDI through greenfield investments exerts a positive impact on economic growth in both developed and developing countries. Conversely, M&A have a negative effect on the economic growth of developing countries, but insignificant on developed countries.

Abstract (EN): This paper investigates whether aggregate Foreign Direct Investment (FDI), cross-border Mergers and Acquisitions (M&A) and greenfield investments affect economic growth, based on a panel data of 53 countries over the period 1996-2006. Both causality tests and single growth equations are applied to examine this relationship. The evidence suggests that there is bidirectional causality between FDI, M&A and growth. It also suggests that economic growth Granger causes greenfields, but the reverse is not true. The estimation of the growth equation leads us to conclude that FDI through greenfield investments exerts a positive impact on economic growth in both developed and developing countries. Conversely, M&A have a negative effect on the economic growth of developing countries, but insignificant on developed countries.

Language: English

Type (Professor's evaluation): Scientific