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Does FDI mode of entry matter for economic performance? : The Case of Korea

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  • Does FDI mode of entry matter for economic performance?
  • Lee, Seong-Bong; Yun, Mikyung
  • Korea Institute for International Economic Policy


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Title Does FDI mode of entry matter for economic performance?
Similar Titles
Sub Title

The Case of Korea

Material Type Reports
Author(English)

Lee, Seong-Bong; Yun, Mikyung

Publisher

Seoul:Korea Institute for International Economic Policy

Date 2006
Series Title; No KIEP Working Paper / 06-02
Pages 48
Subject Country South Korea(Asia and Pacific)
Language English
File Type Link
Subject Economy < Direct Investment
Holding Korea Institute for International Economic Policy

Abstract

This paper attempted to empirically test the proposition that unlike the typical concern against M&A, there is little difference in firm performance by modes of FDI entry. If this is the case, there is no reason to prefer other modes of entry over M&A. The major contribution of this paper is that it calls into question the current classification scheme of mode of FDI entry, on which government tax incentives are based. This paper corrects for this, reclassifying the modes of entry through detailed analysis of each investment case to reflect as much as possible actual complexity of the cross border investment deal.
The empirical part of this paper confirms, even after reclassifying the mode of entry into three groups, that there are indeed no significant differences between greenfield, M&A and P&A in terms of corporate performance (measured by various profitability measures) and subsequent investment behavior (measured by changes in total assets). (The rest omitted)