Abstract

While the effect of foreign direct investment (FDI) on economic growth at the aggregate level is ambiguous, recent studies at the sector level suggest that this could be due to aggregation. And yet, studies on the effect of FDI on growth at the sector level are scant in the literature. In this paper, I empirically examine the effect of FDI on growth using detailed data on worldwide mergers and acquisitions (M&A) activity at industry level from 1986 to 2010. My results show that foreign acquisition has positive effect on the host country’s economic growth overall. However, the effect varies by sector and foreign acquisition into extractive industries has least positive effect on growth. This also seems to be more pronounced in natural resource-abundant developing countries. On the other hand, foreign acquisition into manufacturing sector has biggest positive effect on growth.

Talk to us

Join us for a 30 min session where you can share your feedback and ask us any queries you have

Schedule a call

Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.