Greenfield FDI, cross-border M&As, and government size. Issue 5 (4th July 2017)

• Record Type: Journal Article
• Authors: Ashraf, Ayesha; Herzer, Dierk; Nunnenkamp, Peter
• Is Part Of: Journal of international trade & economic development. Volume 26:Issue 5(2017)
• Page Start: 566
• Page End: 584
• Publication Date: 2017-07-04
• Subjects: Foreign direct investment -- mergers and acquisitions -- greenfield FDI -- government size; F21 -- F23 -- E62; International trade -- Periodicals; Economic development -- Periodicals; 337
• DOI: 10.1080/09638199.2017.1281341
• Languages: English
• ISSNs: 0963-8199

Abstract

ABSTRACT: This study examines the effects of greenfield foreign direct investment (FDI) and cross-border mergers and acquisitions (M&As) on government size in host countries of FDI. Using panel data for up to 130 countries for the period from 2003 to 2011, the study specifically tests the compensation hypothesis, suggesting that by increasing economic insecurity, economic openness leads to larger government size. It is found that greenfield FDI increases labour market volatility and thereby economic insecurity while M&As are not significantly associated with labour market volatility. The main results of this study are that greenfield FDI has a robust positive effect on government size, while M&As have no statistically significant effect on government size in the total sample of developed and developing countries, as well as in the sub-samples of developed and developing countries.