Economia Politica

, Volume 35, Issue 1, pp 41–70 | Cite as

Impact of Greenfield FDI versus M&A on growth and domestic investment in developing Asia

  • Sasidaran GopalanEmail author
  • Alice Ouyang
  • Ramkishen S. Rajan


A large literature establishes the growth-enhancing benefits of foreign direct investment (FDI) flows into emerging market economies in general. Conventional wisdom holds that FDI is a preferable form of external financing compared to other types of capital flows because of its stabilizing properties. While this might hold true largely for FDI flows of the Greenfield variety, in reality, a greater share of FDI to emerging economies in general and Asian economies appears to be in the form of mergers and acquisitions (M&A). Do all types of FDI flows produce similar macroeconomic benefits? This paper empirically explores whether the type of FDI flow, i.e. Greenfield versus M&A, matters in the way it impacts economic growth and domestic investment for a large panel of developing Asian economies over 1990–2013. We find Greenfield FDI contributes positively to economic growth while FDI in the form of M&A appears to have no significant growth influence. We also find that the effects of Greenfield FDI on domestic capital formation are stronger and larger relative to M&A flows.


Asia Foreign direct investment (FDI) Greenfield Growth Mergers and acquisitions (M&A) Investments 

JEL Classification

E22 F21 F23 O47 



This paper was supported by China National Social Science Fund (Grant No.: 16BJY167).


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Copyright information

© Springer International Publishing AG, part of Springer Nature 2017

Authors and Affiliations

  1. 1.Asia Competitiveness InstituteLee Kuan Yew School of Public Policy, National University of SingaporeSingaporeSingapore
  2. 2.China Academy of Public Finance and Public PolicyCentral University of Finance and EconomicsBeijingChina
  3. 3.Lee Kuan Yew School of Public PolicyNational University of SingaporeSingaporeSingapore

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