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On the Effects of Economic Integration on Greenfield Investments and Cross-border Mergers and Acquisitions Location Pattern

Author

Listed:
  • Bertrand, Olivier

    (TEAM. University of Paris 1 Pantheon Sorbonne and CNRS)

Abstract

This paper investigates the linkages between economic integration and horizontal Foreign Direct Investment (FDI) location. In a three-country partial equilibrium model with differentiated Cournot and Bertrand competition, we incorporate the two main FDI modes: Greenfield Investment (G.I.) and crossborder Merger and Acquisition (M&A). We also allow regionally-based firms to invest outside the regional area. Economic integration characterized by internal and external transaction costs may affect entry modes (G.I. vs. M&A) and its location (intra - extra regional flows). Our findings suggest the existence of complex linkages between economic integration and FDI location pattern depending simultaneously on set-up fixed costs, the competitive mode of market interaction and the product differentiation. However, the role of cross-border M&A as well as the importance of FDI outflows from the regional area is highlighted.

Suggested Citation

  • Bertrand, Olivier, 2005. "On the Effects of Economic Integration on Greenfield Investments and Cross-border Mergers and Acquisitions Location Pattern," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 20, pages 26-51.
    • Handle: RePEc:ris:integr:0304
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    Citations

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    Cited by:

    1. Albornoz, Facundo & Corcos, Gregory & Kendall, Toby, 2009. "Subsidy competition and the mode of FDI," Regional Science and Urban Economics, Elsevier, vol. 39(4), pages 489-501, July.
    2. Bertrand, Olivier & Ivaldi, Marc, 2006. "European Competition Policy in International Markets," IDEI Working Papers 419, Institut d'Économie Industrielle (IDEI), Toulouse.

    More about this item

    Keywords

    FDI; integration; location; entry mode; mergers and acquisitions;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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