Greenfield Investments Research Articles

Family firms’ equity entry modes: Bridging family business and international business

Abstract In the global economy, the international strategies of family firms, influenced by family ownership and management, remain underexplored. Bridging the family business and international business fields, we use the socioemotional wealth lens to examine 1,236 international expansions from 2007 to 2013. Categorizing firms into pure family, nearly pure family, borderline family, and non-family typologies, we assess the influence of internal (experience, knowledge) and external (country risk) factors on their entry modes. Results indicate that higher family involvement in ownership/management increases the preference for greenfield investments over acquisitions or equity alliances, a relationship further moderated by international experience and country risk. This study provides nuanced insights into the international behaviors of family firms.

Do tax incentives for innovation attract high‐technology investment from emerging markets? Evidence from China's outward foreign direct investment

AbstractWe examine whether the innovation box regime (IBR), a tax incentive with lower tax rates on intellectual property (IP)‐related income, attracts high‐technology investment from emerging markets. Using the staggered difference‐in‐differences (DID) method, we find that China's high‐technology investment in IBR countries, relative to non‐IBR countries, increases significantly after the implementation of IBR. This finding is robust to a battery of sensitivity tests. The mechanism analysis suggests that the attraction of the IBR for high‐technology investment is realised through the encouragement of innovation, and this finding is also verified in the heterogeneity analysis. We also find that the IBR has a positive effect on high‐technology investment only if the tax incentives apply to pre‐existing IP before the regime implementation, and the ease with which enterprises can directly use the latest technologies in the host country does not have an impact on the effectiveness of the IBR. Moreover, the effect of IBR on M&A is larger than that on greenfield investment. Our study contributes to the literature and policy assessment on IBR.

Foreign-origin managers and FDI location choice

AbstractBuilding upon the upper echelons theory of organizations as applied to internationalization strategies, we investigate the impact of foreign-origin top management team (TMT) members on their companies’ location choice. We propose that a manager-from-target effect may exist, by which a manager’s knowledge of their country of origin increases the likelihood of choosing that country as a target. We expect it to be stronger for acquisitions than for greenfield investments, the inputs of foreign-origin managers being more relevant in the first case. Based on a large sample of foreign direct investment from 2013 to 2019, and using name analysis to identify TMT members’ origins, we find that the effect is present in both establishment modes but larger and more robust for acquisitions. It is also larger in companies with less diverse TMTs, for which targeting one manager’s country of origin instead of others’ may be less likely to cause conflict. Future research should explore whether investments in locations suggested by managers from the target country outperform others. If this is the case, it implies that recruiting foreign-origin top managers can improve a company’s internationalization strategy via better location choices.

Chinese Multinationals and Europe’s Geoeconomic Turn: The De‐Globalization of the Chinese ICT and Automotive Industry?

Amid increasing geopolitical tensions between Western powers and China over the alleged state-capitalist nature of Chinese corporate internationalization, European governments have introduced a set of political measures tightening their trade and investment regimes on grounds of national security and economic competitiveness. This article analyzes how this “geoeconomic turn” in Europe affected the internationalization of (state-backed) Chinese firms into Europe and hence the establishment of Sino-European corporate relations. With a focus on the Chinese ICT and automotive industries, we zoom in on corporate internationalization by distinguishing two modes: (a) outward foreign direct investments (greenfield investments and mergers and acquisitions) and (b) the formation of collaborative ties (strategic alliances and joint ventures) with European companies—a hitherto underexplored form of Sino-European corporate relations. Our analysis is predicated on a comprehensive dataset consolidating information on both modes of internationalization for the period 2000–2023. We show that, in relation to investment numbers, Chinese companies continue to expand into Europe, even if values are decreasing. We also find that the formation of collaborative ties (strategic alliances and joint ventures) has not halted but increased in the wake of Europe’s geoeconomic turn, indicating a further intensification of Sino-European corporate relations, though under the radar of tightening investment policies and mechanisms. When unpacking the variegated impact of the geoeconomic turn on Chinese companies’ internationalization strategies in Europe, our study also finds, however, that its ramifications vary substantively—not only per sector but also among companies exposed to varying degrees of party-state permeation. Applying a novel fine-grained measure to party-state permeation, the article shows that the geoeconomic turn seems to have affected predominantly those leading Chinese firms with a high party-state exposure.

A Reusable Past. Opportunities for the Utilization of Industrial Heritage in Salgótarján, Hungary

AbstractIndustrial heritage is not just the industrial landscape, buildings, and material objects, but also the highly complex cultural heritage created by industrial society, with many unique features. The former industrial towns of East-Central European countries have little memory of their early capitalist industrial past, and their socialist legacy is mostly seen as an unwanted and unwelcome burden. Industrial heritage preservation in Hungary was also adversely affected by the ideology of de-industrialization in the late 1980s, and this was compounded by struggles over the politics of memory. Salgótarján, as the seat of Nógrád County, is a city with county rights that has one of the worst social and economic indicators in the country, with dozens of slums, many of them on former industrial sites. The number of sites suitable for greenfield investment in the valley town is low, while the proportion of under-utilized brownfields is high. The real turning point in the development of the settlement was the opening of the mines and the mining boom in the second half of the 19th century. The opening of the mines was soon followed by the construction of larger industrial plants: the steel mill, the hollow-glass and later flat-glass factory, and the ironworks (stove factory). Initially, skilled workers were recruited from abroad, which laid the foundations for a unique society, as much of the population had no ties to the settlement, or even to Hungary—only to the work and their employer. The industrial society of Salgótarján formed a well-defined local community with a sense of identity. The management of the companies and factories, the network of workers' welfare institutions, the managed leisure programs and facilities, and of course the built environment of the colonies played a major role in all this. Under state socialism, the factories continued to operate with an artificially inflated workforce, and after the political regime change in 1989, the privatized plants closed down with dramatic abruptness, leading to social trauma and high unemployment in the settlement. The preservation and presentation of industrial heritage is also important for the city's identity while the built environment is undergoing a radical transformation, which is why buildings that are deemed worthy of preservation should be given a new function as soon as possible so that they may remain an integral part of the settlement.

Does Industrial Structure Upgrading Promote China’s Outward Foreign Direct Investment (OFDI) in ASEAN Countries? Evidence from Provincial Panels

Numerous studies have explored the impact of Outward Foreign Direct Investment (OFDI) on upgrading industrial structures in home countries. However, a notable gap exists in the literature regarding the reverse relationship. Based on the cross-border greenfield investment data of Chinese provinces in Association of Southeast Asian Nations (ASEAN) countries from 2003 to 2021, this study employed the Ordinary Least Squares (OLS) model to evaluate the impact of industrial upgrading in each province on OFDI to address this gap. The findings suggest that China’s industrial structure upgrading significantly promotes OFDI toward ASEAN countries, though the effect varies by region within China and by the income levels of host countries. Regionally, industrial upgrading in eastern China notably stimulates OFDI growth, while the effect is not significant in the central and western regions, reflecting inconsistent evolution of industrial structures in various regions. Regarding host country income levels, the promotion effect of industrial structure upgrading on OFDI is influenced by the economic development level of the host country. Furthermore, we find that R&D intensity acts as a moderator that links industrial structural upgrading to OFDI responses. These findings withstand robustness checks, including tests for endogeneity. Ultimately, this study provides policy insights for strengthening the virtuous cycle between industrial upgrading and OFDI.

Balancing growth and sustainability: The impact of Greenfield investment on trade adjusted carbon emissions

In the last two decades, the surge in carbon emissions has escalated environmental damage and is a major concern globally. Recognized as a significant threat to humanity, unchecked environmental degradation can potentially hinder the achievement of sustainable development. As a result, accurate monitoring of carbon emissions becomes imperative for formulating effective climate policies. Taking into consideration, this study has taken the newly developed consumption-based carbon emissions measure to study the pollution haven hypothesis and examine the link between Greenfield Investment (GFI) inflows to host nations and their environmental impact for 85 developing countries from 1990 to 2020. The results show a positive correlation between Greenfield investment and Consumption-based Carbon Dioxide Emissions (CCO2) in sampled nations. Similarly, energy usage and export damage the environment because developing countries rely on conventional and old methods of energy usage. The results were further analyzed for low, lower middle, and upper middle income countries as well. The subsample outcome shows that Greenfield investment has a more damaged environment in low income countries as compared to lower middle and upper middle income countries. These insights underscore the urgency for developing countries to adopt environmentally conscious policies to attract international investors. It also emphasizes the need for stringent regulations aimed at curbing environmental pollution and complying with the Sustainable Development Goals (SDGs). Similarly, low and lower middle income countries to attract Greenfield investment, may also focus more on strict environmental pollution policies. Industries must be shifted from conventional energy methods to renewable energy sources. Sustainable Development Goals; 7, 12, and 13 can be achieved by host countries, alluring investors to invest in terms of Greenfield in renewable energy resources, which would be used in automobile transportation, to shift industries from conventional energy resources to renewable energy resources. The same Greenfield investment would also be used in bringing efficient machinery for more production in industries with minimal environmental pollution.

Gender Diversity and Corporate Resilience to Climate Change: Evidence from Greenfield Investments

Gender Diversity and Corporate Resilience to Climate Change: Evidence from Greenfield Investments

Towards achieving status of green economy in OECD countries: Articulating the role of nuclear energy, greenfield investment and environmental taxation

In today's era, the green economy has become the central focus worldwide, along with the clean energy transition. Unfortunately, the current economic development model flourishes at the expense of the natural environment and ecosystems. Thereby, the concept of green economy gets immense attention among scholars and policy analyst. Most countries are dependent on energy import due to limited and unsustainable natural resource use. In this context, environmental taxation can play a key role in restricting the unsustainable use of natural resources, and nuclear energy can reduce energy import dependency, helping to shift from conventional growth to green economic growth. In this context, this study is an attempt to explore the relationship between nuclear energy, environmental taxation, greenfield investment, and the green economy in a panel of 16 Organization for Economic Co-operation and Development (OECD) economies from 2000 to 2019. To get empirical estimate the study relies on Method of Moment Quantile Regression (MM-QR) approach. Interestingly, this study found that nuclear energy development discourages green economic growth across all quantiles in OECD countries. Furthermore, the study found that environmental taxation helps OECD countries achieve green economy status. Greenfield investments are another factor promotes the green economy. Climate policy measures are suggested in line with increasing share of nuclear energy in energy mix through greenfield investment in energy sector.

Economic complexity, greenfield investments, and energy innovation: policy implications for sustainable development goals in newly industrialised economies.

The crucial role of environmental assessment quality has been recognised by environmental and sustainable development goals in addressing climate change challenges. By focusing on the key identifier of environmental assessment, progress can be made towards overcoming climate change issues effectively. The current study considers environmental commitments under COP28 to study the role of economic complexity, greenfield investments, and energy innovation in environmental degradation in newly industrialised economies from 1995 to 2021. We employ novel panel estimations from CS-ARDL, CS-DL, AMG, and CCEMG to confirm that economic growth and greenfield investments degrade environmental quality. On the other hand, energy innovation and urbanisation improve environmental sustainability. Lastly, we confirm the EKC hypothesis for economic complexity as well. Given the reported empirical findings, the study suggests policymakers must focus on economic complexity to transform industrial sectors' economic potential. Furthermore, foreign investment projects must be linked with environmental goals to increase renewable energy capacity.

The impacts of the China–US trade war on China’s trade and greenfield investment

We assess the impacts of the China–US trade war on the bidirectional trade and investment flows of China. We find that China’s exports and imports both dropped sharply after the trade war began. In terms of investment flows, we find that China’s greenfield investment in the US faltered in the face of the increasing trade friction, but the impact of the trade war on the US’s greenfield investment in China is ambiguous. In addition, the trade friction only impeded the export volumes of China and had an insignificant impact on the export prices. In contrast, both the import volumes and prices for China decreased.

Is Green Always Beneficial? Assessing the True Impact of Greenfield Investments on Green Economy---Evidence from Selected Asean Countries

Is Green Always Beneficial? Assessing the True Impact of Greenfield Investments on Green Economy---Evidence from Selected Asean Countries

The geography of acquisitions and greenfield investments: Firm heterogeneity and regional institutional conditions

AbstractThis paper investigates how institutional conditions at national and regional levels shape the decisions of Multinational Enterprises (MNEs) to invest abroad by means of either acquisitions or greenfield investments. The empirical analysis covers all foreign direct investment (FDI) projects in the European Union by the largest MNEs in the world to study alternative choices by the same firm and account for firm‐level characteristics in investment decisions. The empirical results show that—other things being equal—regions with stronger investment eco‐systems are more likely to attract acquisitions, while greenfield investments are more likely in regions with comparatively weaker systemic conditions. Howerver, the regional quality of institutions makes a fundamental difference to the nature of the investment projects attracted by regions: those with high quality of government can attract greenfield investments undertaken by the most productive MNEs. By improving their quality of government, local, and regional policy makers can attract higher quality greenfield investment projects to their constituencies, potentially breaking the vicious circle between low productivity areas and low productivity FDI.

African continental free trade area and greenfield investment: Likely effect and transmission channels

AbstractWe examine the likely effect of the African Continental Free Trade Area (AfCFTA) on African investment using data on announced greenfield investment. Departing from existing work on this subject, we add value by providing estimates based on a general equilibrium counterfactual analysis in a structural gravity framework. Results suggest that the stock of announced intra‐African greenfield investment in 2018 would have increased by 0.7 percent from a successful implementation of the AfCFTA in that year relative to the baseline scenario of no agreement, with considerable heterogeneity across source and destination countries. Moreover, the positive effect is found to increase with the depth of the negotiated agreement. Exploring possible transmission channels we find the trade elasticity of announced greenfield investment to be positive, especially for trade in intermediates in African host countries with strong governance indicators. This suggests that, by improving institutional quality and galvanising regional value chains, integration within Africa could also incentivise investment.

FDI impact: catalyzing digital capabilities in host nations

PurposeThis study aims to investigate the impact of foreign direct investment (FDI) on national digital capability, specifically differentiating the impact between FDI greenfield and mergers and acquisitions (M&A). The research also investigates factors shaping digital capabilities, encompassing government transparency and absorptive capability, while exploring the mediating influence of absorptive capability in the FDI–digital capability relationship.Design/methodology/approachAn econometric model has been developed to examine the interrelationship between national digital capability, FDI inflows, national absorptive capability and government transparency. The data set encompasses 55 countries over a period of nine years (2013–2021). National digital capability data is derived from the well-established index published by the World Competitive Centre (WCC). The sources of the explanatory variables align with standard practices, drawing from reputable institutions (UNCTAD and the World Bank, among others).FindingsThe findings reveal a significant positive impact of FDI, particularly in greenfield investments, on national digital capability. Government transparency and research and development (R&D) investment are crucial factors contributing to digital capabilities. Additionally, the absorptive capacity, reflected by R&D investment, also emerges as a potential moderating factor, influencing the impact of FDI inflows on digital capabilities.Practical implicationsThe results recommend that policymakers and stakeholders should carefully consider the role of FDI, especially in greenfield investments, as a catalyst for enhancing national digital capability. The findings also underscore the significance of promoting government transparency and directing investments towards R&D to nurture digital capabilities. Moreover, understanding the mediating role of absorptive capability can inform strategies aimed at optimizing the impact of FDI on digital capabilities.Originality/valueThis study contributes uniquely to the existing literature by being the first to systematically explore the influence of FDI on national digital capability. Furthermore, it presents innovative empirical findings on the role of absorptive capability in enhancing the FDI impact on national digital capability, an area that remains relatively uncharted in current literature.

Does the Long-Term Developmental Effect of Mergers and Acquisitions and Greenfield Investment Differ in Host African Economies?

The choice between greenfield investment (GFIELDI) and mergers and acquisitions (M&As) is rarely straightforward for host developing countries (DCs), as this subject has not been thoroughly researched. Thus, this study fills this gap in the literature. It compares the overall long-term dynamic effect of GFIELDI and M&As on host African countries (ACs) from 1990 to 2020. The study, in particular, adopted a rigorous analytical framework that optimizes the welfare-decreasing and welfare-increasing effects of these two main FDI entry modes in the countries under study. The study used panel data from 15 African countries and adopted the PMG/ARDL approach. Therefore, the empirical findings of this study surprisingly contradict not only the preferred GFIELDI entry option of governments and development partners but also nearly all of the existing empirical literature in other developing regions. The results specifically demonstrate that while M&As outperform the GFIELDI in terms of their size effects, they both have net positive long-term dynamic effects on real GDP per capita in the studied countries. In practical terms, a 1% increase in GFIELDI has, on average, a weaker positive long-term dynamic effect on real GDP per capita than an equivalent investment in M&As. Except for Malawi and Botswana, evidence shows that the speed of adjustment parameter is consistently negative and statistically significant. South Africa (SA) has the lowest adjustment speed rate (=-0.157), while Morocco has the highest (=-1.554). Our findings have important policy implications, which are outlined in the conclusion of this study.

Causality between Greenfield Investments, Regulatory Quality, and Economic growth: Is the Western Balkans different?

The study aims to examine the causality link between Greenfield Investments, Regulatory Quality, and Economic Growth by using seven Western Balkan countries between 2003 and 2022. Johansen cointegration tests, the VECM model, and multiple empirical unit root tests are the foundation of the empirical analysis. The study's findings indicate that, in the short run, GFI-led growth in Albania and North Macedonia is supported. In the long run, the analysis backs the growth driven by GFI in Serbia and Montenegro and the growth driven by regulatory quality in Albania, Bosnia and Herzegovina, North Macedonia, Serbia, Montenegro, and Bulgaria. The findings support the growth driven by regulatory quality in most Western Balkan countries, reassuring national policymakers that encouraging improvements in regulatory quality and GFI inflows is warranted and will ultimately spur economic growth.

Greenfield investment and job creation in Ghana: a sectorial analysis and geopolitical implications of Chinese investments

Multinational investment has attracted mixed reactions from scholars and policymakers concerning their role and impact on job creation in host countries, particularly in developing economies. Using Ghana as a case study, this paper examines the impact of Greenfield investment on job creation. Proponents of multinational corporations (MNCs) argue that foreign direct investment (FDI) leads to economic growth, creates technological spillover, increases exports, and creates jobs, among other benefits. This has encouraged developing economies to adopt developmental strategies around MNC activities. Although most researchers have analyzed the impact of FDI on job creation, the unanswered question is: Does greenfield investment in Ghana lead to significant job creation in the formal sector? Extant literature considers FDI monolithic, without adequately differentiating between Green and Brownfield investments. Using granular data from the FDI Markets, this research paper fills this gap by empirically analyzing the Greenfield investment by 386 multinational companies in Ghana from 2003 to September 2020. Over the specified year range, these companies engaged in 500 projects across Ghana. Adopting the ordinary least square analysis (OLS), the study demonstrates that Greenfield investment has a statistically significant and positive impact on job creation in Ghana. Out of the 31 sectors, only the following sectors contribute significantly to job creation through Greenfield investment in Ghana: Consumer Products, Food & Beverage, Industrial Equipment, and Non-automotive transport OEM. This paper contributes to a better understanding of how government investment in fixed assets (GCF) such as roads, railways, and industrial buildings in the local economy should be managed efficiently so as not to spur inflation, which correlates negatively with jobs. Finally, this paper analyzes Chinese investments in Ghana, comparing them with U.S. investments, and examining their broader geopolitical implications, which highlights the importance of aligning foreign investments with national development strategies and adhering to international norms and standards.

Navigating multiple institutional environments: institutional quality and the role of Belt and Road Initiative on location choice of Chinese MNEs

Purpose This study aims to explore the extent to which Chinese multinational enterprises (MNEs) rely on supranational institution – the Belt and Road Initiative (BRI) – versus host country institutional quality to navigate their foreign location choice. Design/methodology/approach This study uses a conditional logit regression model using a sample of 1,302 greenfield investments by Chinese MNEs in 54 BRI participating countries during the period 2011–2018. Findings The results indicate that as a supranational institution, the BRI serves as a substitution mechanism to address the deficiencies in institutional quality in BRI participating countries, thereby attracting Chinese MNEs to invest in those countries. In addition, the BRI’s substitution effect on host country institutional quality is more pronounced for large MNEs, MNEs in the manufacturing industry and MNEs in inland regions. Originality/value This study expands the understanding of the BRI as a supranational institution for MNEs from emerging markets and reveals its substitution effect on the host country institutional quality. Furthermore, it highlights that MNEs with diverse characteristics gain varying degrees of benefits from the BRI.

Socioeconomic and political settings for the land development decreasing urban green. Inside view from Moscow

The analysis shows the impact of socioeconomic factors and civil freedom on allocating green areas for investments. The research was conducted for the period 1992–2020 using the example of Moscow as the metropolis in a country with a robust centralized political system. Quantitative research methods included recognizing changes in land use, selected socioeconomic parameters, and indicators measuring the power of civil society. Calculated correlations and modeling of the collected data were used to identify Russia's revenue for petroleum and Moscow's budget revenue as predictors for losing green areas. Among the social activity indicators, the Press Freedom indicator was the best correlated and used for modeling. The analysis of the decision-making procedure for land development and the reconstruction of the case Krylatskie Kholmy allowed gaining insight into actual mechanisms leading to investment in urban green areas. The outcomes that were reachedexpress that investing in bare soils is of the most significant importance; however, the dynamics of change decreased in the analyzed period. The modeling showed that growing Russia's revenue for petroleum increases the likelihood of greenfield investment. The legal nature-protection status brings the most significant effect of preventing land development. The likelihood of land development decreases with the growth of Moscow's budget revenue. It indicates the support for the redevelopment of abounded land located within the range of the existing infrastructure. The modeling of the dependence between the Press Freedom index and land development probability demonstrates the possible effectiveness of public opinion pressure to protect natural and semi-natural areas within the urban fabric. The described decision-making mechanism for land development made it possible to assess that the role of civil society in the decision-making process is insufficient, given the converging interests of investors and administration. The results show that in highly centralized countries with a marginal role of civil society, the concentration of capital from the export of strategic natural resources is the key factor of urban green losses. These findings contribute to understanding differences in urban spatial policy approaches to green areas and their effectiveness.