M&A vs. Greenfield

The chapter has raised two critically important questions. First, is the M&A boom a one-time effect of privatization, or is it likely to be followed by a rise in Greenfield investment? Second, do these two types of FDI mode have different macroeconomic consequences in terms of aggregate investment and growth? The main purpose of this chapter is to analyze the two entry modes, mergers and acquisitions and Greenfield investment, specifically, and to present a comparative view of the same and how it leads to the economic growth of a nation. It is concluded that one should choose the right mode according to the different situation about the firms in the international market. The present chapter also concludes that Greenfields and M&As do have a positive homogenous effect on growth. Additionally, the enhancement of human capital is an important condition for the host countries to derive the maximum benefits from Greenfields and M&As. Also, there is empirical evidence of a two-way linkage between FDI and growth. However, the bidirectional relationship exists only for the M&A's growth nexus.

Socio-Economic Impact of Foreign Direct Investment in Developing Countries

The purpose of this chapter is to empirically examine the impact of socio-economic determinate of foreign direct investment in developing economies. FDI is an important part of the massive private investment that is driving economic growth around the world, particularly in the past two decades. This was achieved by examining 10 African countries using data from world development indicators on FDI and socio-economic parameters ranging from 1990 to 2015. A panel regression model was applied to 260 samples. The results showed openness, exchange rate, domestic credit to private sector, and regulatory quality have a significant effect on FDI. Policy makers in African countries need to adopt institutional reforms that could contribute to improving their state of governance, promote their investment climate, and help in attracting more FDI.

The Role of Foreign Direct Investment in Less-Developed Countries

This chapter analyses a number of economic and developmental issues in less-developed countries (LDCs), reviewing the related literature and outlining the challenges ahead for LDCs. The issues considered include foreign direct investment (FDI) policies, recent trends on growth, civil conflict, institutional development, financial sector development, external debt, and other macroeconomic factors. These are identified as pertinent areas where LDCs have faced major challenges in their endeavours to improve economic welfare since they are related to the absorptive capacities, which are important for accruing growth benefits from inward FDI in LDCs. It is anticipated that coverage of these issues will enlighten the issues that these countries face in order to attract and utilise inward FDI. Additionally, it is argued that LDCs can avoid the risk of civil conflict by adopting proactive policies to attract FDI.

Determinants of FDI Inflows in Developing Countries

In the era of globalization, FDI plays an important role as it intensifies the interaction among the countries, regions, and firms. FDI is playing a crucial role in improving the infrastructural facilities of countries and enhancing economic situation especially in the developing countries. Another important aspect of FDI is it increases employment in domestic economies, which in turn reduces the poverty level and also promotes the competition in domestic markets. With these activities, the government earns more revenue, which can be used for developmental activities. In this context, the chapter makes an attempt to identify the determining factors of FDI inflows into developing economies by selecting nine developing countries for the time period 2000-2015. Due to the different characteristics of each of these countries, there is a lot of heterogeneity in the data. To reduce the heterogeneity among the selected economies, the authors propose employing a panel data approach to identify the factors that influence the FDI inflows.

Econometric Analysis of India's Foreign Direct Investment Inflows

In this chapter, the author explains the trend lines, random walk, stationary, structural breaks, and volatility of FDI inflows in India during 1971-2015. Both log linear and exponential trends are significant. FDI inflows are stationary and showed four structural breaks in 1985, 1994, 2000, and 2006. The author found the relation among FDI inflows, growth rate, interest rate, inflation rate, exchange rate, fiscal deficit, external debt, and trade openness with the help of Granger causality, Johansen cointegration test, and vector error correction models. Trace statistic has four cointegrating equations, and Max Eigen statistic has three cointegrating equations. The speed of the vector error correction process is more or less slow except for change in interest rate and change in inflation rate, which are significant where VECM is stable and diverging. Limitations and future scope of research is added. Policy recommendations are also included.

Patterns of Technology Acquisition

Although MNEs are important players in the present global world, there has been a debate regarding, on one hand, how MNEs contribute to the development of indigenous firms in host countries, and on the other hand, how indigenous suppliers are able to cope with their international technology demanding clients. This chapter analyzes the patterns of technology acquisition of 40 firms that supply eight multinational firms that belong to four different industries. It is possible to conclude that there are certain differences among foreign and indigenous suppliers as well across the industries they belong to. These differences are the result of a cumulative process over time, which reflect the different performances of the companies and their relationships with the environment.

The Relative Importance of Trade vs. FDI-Led Economic Growth in Thailand

This chapter investigates the relative strength of the contributions of trade openness and FDI inflows towards economic growth of Thailand, taking account of the importance of human capital and other conditioning factors as a source of technology transfer in facilitating growth. Using Granger causality tests conducted within a vector-error-correction framework, the authors find significant evidence of the complementarities between domestic investment and trade openness, providing support for import-led growth. In contrast, direct support for FDI-led growth is relatively weak, which implies that trade openness has played a more significant role than FDI in influencing Thai economic growth. However, the results reveal a subtle role for technology transfer through the complementary effect of trade on FDI, and FDI on government expenditure, which henceforth influences human capital development with spillovers into domestic investment and growth. This leads us to argue that there is a potential role for FDI interacting with human capital in influencing the future development of the Thai economy, given its active policy of FDI promotion over the past decade.

FDI as a Factor of Improving the Competitiveness of Developing Countries

In the process of globalization of the world economy, foreign direct investment has a significant impact on economic growth and development of the national economy. To adequately facilitate the development of competitiveness, these countries usually intervene through measures and instruments of tax policy. One of the main tasks of developing countries is to create a favorable environment for investors, considering that this is one of the methods to ensure greater capital inflows. The main objective of this chapter is to assess the role of tax policy in achieving the competitiveness of developing countries. For the creators of tax policy, it is very important to constantly review the tax rules to ensure that the country is attractive for foreign investments. The results that were obtained indicate that tax incentives significantly influence the improvement of competitiveness and the attraction of multinational companies as a key holder of foreign direct investment.

Foreign Direct Investment, Technological Innovation, and Export Performance

This chapter's objective is to explore the effects of foreign direct investment inflows and technological innovations on export performance in developing Asian countries (Hong Kong, China, Indonesia, Singapore, India, Turkey, Malaysia, Vietnam, United Arab Emirates, and Thailand) in the period of 1990-2015 by using the panel cointegration technique. The empirical results reveal that there is a cointegration among the variables, and cointegration regression shows that the foreign direct investments, per income and patent applications, have a positive and statistically significant impact on export performance in developing Asian countries. The results reveal that the impact of patent applications is greater than the foreign direct investments on exports. Then, technological development affects exports positively in all countries in the sample, except for India and the United Arab Emirates.

The Role of Governance on Foreign Direct Investment Inflows

The effect of governance on FDI inflows is firstly through the effect of institutions on investment environment of a country and secondly through the decreasing transaction costs, production costs, and uncertainty. The countries are divided into three clusters. A new theoretical perspective is developed considering governance as a base factor. System GMM methodology is used to deal with endogeneity problem. The empirical analysis covers 32 advanced, 70 developing, and 17 least developed countries for the period 1996-2010. Improving governance infrastructure as a base factor attracts more FDI in all country clusters. FDI made into advanced countries are efficiency seeking, FDI made into developing countries are market seeking, and FDI made into least developed countries are resource seeking. Finally, it is found that a motivation factor alone may not be sufficient for MNCs to take FDI decision since they also observe governance infrastructure in host countries and any deterioration in governance infrastructure leads to a decreasing amount of FDI inflows.