Resource title

The Choice of Market Entry Mode: Greenfield Investment, M&A and Joint Venture

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Resource description

Multinationals may enter a host market by different modes of foreign direct investment (FDI). This paper examines the choice of FDI mode, and shows that the profitability of greenfield investment influences this choice not only directly, but also indirectly since it determines the outside option of potential acquisition targets and joint venture partners. In particular, even if greenfield investment is a viable option, the multinational may prefer a joint venture to M&A, and M&A to greenfield investment, provided that M&A and joint venture both involve sufficiently low fixed costs. The reason is that the profitability of greenfield investment both reduces the acquisition price in the case of M&A, and gives local firms an incentive to agree to a joint venture.

Resource author

Frank Stähler, Michael Ryan, Horst Raff

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Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/22035

Resource license

Adapt according to the presented license agreement and reference the original author.