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The geography of acquisitions and greenfield investments: firm heterogeneity and regional institutional conditions

Amendolagine, Vito, Crescenzi, Riccardo ORCID: 0000-0003-0465-9796 and Rabellotti, Roberta (2022) The geography of acquisitions and greenfield investments: firm heterogeneity and regional institutional conditions. Geography and Environment Discussion Paper Series (33). Department of Geography and Environment, LSE, London, UK.

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Abstract

This paper investigates how institutional conditions at national and regional levels shape the decisions of Multinational Enterprises (MNEs) to invest abroad by means of either acquisitions or greenfield investments. The empirical analysis covers all Foreign Direct Investment (FDI) projects in the European Union by the largest MNEs in the world to study alternative choices by the same firm and account for firm-level characteristics in investment decisions. The empirical results show that - other things being equal - MNEs prefer acquisitions to control activities in regions with stronger investment eco-systems, while they choose greenfield investments in regions with weaker systemic conditions. Moreover, the regional quality of government makes a fundamental difference to the nature of the investment projects attracted by regions: those with high quality of government can attract greenfield investments undertaken by the most productive MNEs. By improving their quality of government, local and regional policy makers can attract higher quality FDI to their constituencies, potentially breaking the vicious circle between low productivity areas and low productivity FDI.

Item Type: Monograph (Discussion Paper)
Official URL: http://www.lse.ac.uk/geography-and-environment/res...
Additional Information: © 2022 The Authors
Divisions: Geography & Environment
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HG Finance
JEL classification: R - Urban, Rural, and Regional Economics > R1 - General Regional Economics > R12 - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade
R - Urban, Rural, and Regional Economics > R5 - Regional Government Analysis > R58 - Regional Development Policy
F - International Economics > F2 - International Factor Movements and International Business > F23 - Multinational Firms; International Business
Date Deposited: 19 Jul 2022 12:57
Last Modified: 14 Sep 2022 23:07
URI: http://eprints.lse.ac.uk/id/eprint/115597

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