TY - JOUR
T1 - The Effects of Political Risk on Different Entry Modes of Foreign Direct Investment
AU - Lee, Hoon
AU - Biglaiser, Glen
AU - Staats, Joseph L.
N1 - Publisher Copyright:
©, Taylor & Francis Group, LLC.
PY - 2014/10/20
Y1 - 2014/10/20
N2 - Although numerous studies document the effect of political institutions on foreign direct investment (FDI), few works in the political economy literature have investigated the link between political institutions and the mode of entry chosen by investors, be it mergers and acquisitions, joint ventures, or greenfield investments. Using panel data for 111 developing countries covering 1980–2006, we find that countries with political institutions that uphold good governance tend to attract higher levels of mergers and acquisitions, as opposed to joint ventures and greenfield investments, because such institutions help to mitigate the special risks faced by merger and acquisition investors. Our findings provide a nuance for understanding the different effects of political institutions based on the particular mode of entry.
AB - Although numerous studies document the effect of political institutions on foreign direct investment (FDI), few works in the political economy literature have investigated the link between political institutions and the mode of entry chosen by investors, be it mergers and acquisitions, joint ventures, or greenfield investments. Using panel data for 111 developing countries covering 1980–2006, we find that countries with political institutions that uphold good governance tend to attract higher levels of mergers and acquisitions, as opposed to joint ventures and greenfield investments, because such institutions help to mitigate the special risks faced by merger and acquisition investors. Our findings provide a nuance for understanding the different effects of political institutions based on the particular mode of entry.
KW - foreign direct investment
KW - greenfield investments
KW - joint ventures
KW - political risk
UR - http://www.scopus.com/inward/record.url?scp=84908364517&partnerID=8YFLogxK
U2 - 10.1080/03050629.2014.899225
DO - 10.1080/03050629.2014.899225
M3 - Article
AN - SCOPUS:84908364517
SN - 0305-0629
VL - 40
SP - 683
EP - 710
JO - International Interactions
JF - International Interactions
IS - 5
ER -