IDEAS home Printed from https://ideas.repec.org/a/taf/ijecbs/v10y2003i3p245-259.html
   My bibliography  Save this article

UK direct investment in the United States: a mode of entry analysis

Author

Listed:
  • Peter Nisbet
  • Wayne Thomas
  • Stuart Barrett

Abstract

This article investigates the reasons underlying the high propensity of UK firms to directly invest in the United States via acquisition and merger. Using a binomial logit model, this study analyses data from 142 firms in five industrial sectors over the period 1984-1994. Together, these sectors account for more than 80% of UK foreign direct investment (FDI) in the sample period. The results highlight the role of diversification in explaining this behaviour. In contrast, the relative lack of evidence to support the role of exchange rates and leverage in influencing the decision to merge/acquire continues to fuel division as to the role of capital market imperfections in determining mode of entry.

Suggested Citation

  • Peter Nisbet & Wayne Thomas & Stuart Barrett, 2003. "UK direct investment in the United States: a mode of entry analysis," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 10(3), pages 245-259.
    • Handle: RePEc:taf:ijecbs:v:10:y:2003:i:3:p:245-259
    DOI: 10.1080/1357151032000126229
    as

    Download full text from publisher

    File URL: http://www.tandfonline.com/10.1080/1357151032000126229
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/1357151032000126229?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Walter Kuemmerle, 1999. "The Drivers of Foreign Direct Investment into Research and Development: An Empirical Investigation," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 30(1), pages 1-24, March.
    2. Bruce Kogut & Harbir Singh, 1988. "The Effect of National Culture on the Choice of Entry Mode," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 19(3), pages 411-432, September.
    3. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
    4. Jean-François Hennart & Young-Ryeol Park, 1993. "Greenfield vs. Acquisition: The Strategy of Japanese Investors in the United States," Management Science, INFORMS, vol. 39(9), pages 1054-1070, September.
    5. Jean‐Francois Hennart & Sabine Reddy, 1997. "The Choice Between Mergers/Acquisitions And Joint Ventures: The Case Of Japanese Investors In The United States," Strategic Management Journal, Wiley Blackwell, vol. 18(1), pages 1-12, January.
    6. Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc.
    7. Gomes-Casseres, Benjamin, 1989. "Ownership structures of foreign subsidiaries : Theory and evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 11(1), pages 1-25, January.
    8. Brent D Wilson, 1980. "The Propensity of Multinational Companies to Expand Through Acquisitions," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 11(1), pages 59-64, March.
    9. Hatzius, J., 1997. "Foreign direct investment," LSE Research Online Documents on Economics 20351, London School of Economics and Political Science, LSE Library.
    10. Rachel McCulloch, 1993. "New Perspectives on Foreign Direct Investment," NBER Chapters, in: Foreign Direct Investment, pages 37-56, National Bureau of Economic Research, Inc.
    11. Emmanuel Cleeve, 1997. "The Motives for Joint Ventures: A Transaction Costs Analysis of Japanese MNES in the UK," Scottish Journal of Political Economy, Scottish Economic Society, vol. 44(1), pages 31-43, February.
    12. John H Dunning, 1995. "Reappraising the Eclectic Paradigm in an Age of Alliance Capitalism," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 26(3), pages 461-491, September.
    13. Dunning, John H., 2000. "The eclectic paradigm as an envelope for economic and business theories of MNE activity," International Business Review, Elsevier, vol. 9(2), pages 163-190, April.
    14. Zejan, Mario C, 1990. "New Ventures of Acquisitions. The Choice of Swedish Multinational Enterprises," Journal of Industrial Economics, Wiley Blackwell, vol. 38(3), pages 349-355, March.
    15. Hennart, Jean-François, 2010. "Transaction Cost Theory and International Business," Journal of Retailing, Elsevier, vol. 86(3), pages 257-269.
    16. Stevens, Guy V. G., 1998. "Exchange Rates and Foreign Direct Investment: A Note," Journal of Policy Modeling, Elsevier, vol. 20(3), pages 393-401, June.
    17. Kenneth A. Froot, 1993. "Foreign Direct Investment," NBER Books, National Bureau of Economic Research, Inc, number froo93-1.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Yusnidah Ibrahim & Jimoh Olajide Raji, 2018. "Cross-border merger and acquisition activities in Asia: the role of macroeconomic factors," Studies in Economics and Finance, Emerald Group Publishing Limited, vol. 35(2), pages 307-329, May.
    2. Uddin, Moshfique & Boateng, Agyenim, 2011. "Explaining the trends in the UK cross-border mergers & acquisitions: An analysis of macro-economic factors," International Business Review, Elsevier, vol. 20(5), pages 547-556, October.
    3. Saliola, Federica & Zanfei, Antonello, 2009. "Multinational firms, global value chains and the organization of knowledge transfer," Research Policy, Elsevier, vol. 38(2), pages 369-381, March.
    4. Onur Koska, 2009. "Foreign Direct Investment For Sale," Working Papers 0910, University of Otago, Department of Economics, revised Oct 2009.
    5. Boateng, Agyenim & Hua, Xiuping & Uddin, Moshfique & Du, Min, 2014. "Home country macroeconomic factors on outward cross-border mergers and acquisitions: Evidence from the UK," Research in International Business and Finance, Elsevier, vol. 30(C), pages 202-216.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Anil, Ibrahim & Tatoglu, Ekrem & Ozkasap, Gaye, 2014. "Ownership and market entry mode choices of emerging country multinationals in a transition country: evidence from Turkish multinationals in Romania," Journal of East European Management Studies, Nomos Verlagsgesellschaft mbH & Co. KG, vol. 19(4), pages 413-452.
    2. Cristina López-Duarte & Esteban García-Canal, 1998. "La estructura de propiedad de la inversión directa exterior," Investigaciones Economicas, Fundación SEPI, vol. 22(1), pages 19-44, January.
    3. Cristina López-Duarte & Esteban García-Canal, 2002. "The Effect of Firm and Host Country Characteristics on the Choice of Entry Mode: Empirical Evidence from Spanish Firms," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 6(2), pages 153-168, May.
    4. Chen, Ming-Yuan & Chang, Jing-Yun, 2011. "The choice of foreign market entry mode: An analysis of the dynamic probit model," Economic Modelling, Elsevier, vol. 28(1), pages 439-450.
    5. Slangen, Arjen & Hennart, Jean-François, 2007. "Greenfield or acquisition entry: A review of the empirical foreign establishment mode literature," Journal of International Management, Elsevier, vol. 13(4), pages 403-429, December.
    6. Francisco J. Más & Felipe Ruiz Moreno, 2003. "Spanish Company Foreign Market Entry," Working Papers. Serie EC 2003-10, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    7. Marina Papanastassiou & Robert Pearce & Antonello Zanfei, 2020. "Changing perspectives on the internationalization of R&D and innovation by multinational enterprises: A review of the literature," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 51(4), pages 623-664, June.
    8. Demirbag, Mehmet & Tatoglu, Ekrem & Glaister, Keith W., 2009. "Equity-based entry modes of emerging country multinationals: Lessons from Turkey," Journal of World Business, Elsevier, vol. 44(4), pages 445-462, October.
    9. Chen, Ming-Yuan & Chang, Jing-Yun, 2011. "The choice of foreign market entry mode: An analysis of the dynamic probit model," Economic Modelling, Elsevier, vol. 28(1-2), pages 439-450, January.
    10. Demirbag, Mehmet & Glaister, Keith W. & Tatoglu, Ekrem, 2007. "Institutional and transaction cost influences on MNEs' ownership strategies of their affiliates: Evidence from an emerging market," Journal of World Business, Elsevier, vol. 42(4), pages 418-434, December.
    11. Nguyen, Quyen T.K. & Rugman, Alan M., 2015. "Multinational subsidiary sales and performance in South East Asia," International Business Review, Elsevier, vol. 24(1), pages 115-123.
    12. Manuel Portugal Ferreira & Cláudia Frias Pinto & Fernando Ribeiro Serra, 2014. "The transaction costs theory in international business research: a bibliometric study over three decades," Scientometrics, Springer;Akadémiai Kiadó, vol. 98(3), pages 1899-1922, March.
    13. Sels, A.T.H., 2006. "Foreign direct investment as an entry mode. An application in emerging economies," Other publications TiSEM 583ca9b5-1691-425d-8f77-0, Tilburg University, School of Economics and Management.
    14. Hennart, Jean-François & Sheng, Hsia Hua & Pimenta, Gustavo, 2015. "Local complementary inputs as drivers of entry mode choices: The case of US investments in Brazil," International Business Review, Elsevier, vol. 24(3), pages 466-475.
    15. Larimo, Jorma, 2003. "Form of investment by Nordic firms in world markets," Journal of Business Research, Elsevier, vol. 56(10), pages 791-803, October.
    16. Rae Cho, Kang & Padmanabhan, Prasad, 2001. "The relative importance of old and new decision specific experience in foreign ownership strategies: an exploratory study," International Business Review, Elsevier, vol. 10(6), pages 645-659, December.
    17. Pak, Yong Suhk & Park, Young-Ryeol, 2005. "Characteristics of Japanese FDI in the East and the West: Understanding the strategic motives of Japanese investment," Journal of World Business, Elsevier, vol. 40(3), pages 254-266, August.
    18. Konopaske, Robert & Werner, Steve & Neupert, Kent E., 2002. "Entry mode strategy and performance: the role of FDI staffing," Journal of Business Research, Elsevier, vol. 55(9), pages 759-770, September.
    19. Bell, J.H.J., 1996. "Joint or Single Venturing? : An Electric Approach to Foreign Entry Mode Choice," Other publications TiSEM 06f84735-3cf5-432f-8bc8-c, Tilburg University, School of Economics and Management.
    20. Mehmet Demirbag & Ekrem Tatoglu & Keith W. Glaister, 2008. "Factors affecting perceptions of the choice between acquisition and greenfield entry: The case of Western FDI in an emerging market," Management International Review, Springer, vol. 48(1), pages 5-38, February.

    More about this item

    Keywords

    Foreign Direct Investment; Mode of Entry;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:ijecbs:v:10:y:2003:i:3:p:245-259. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/CIJB20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.