Greenfield Investments Research Articles

The effects of different modes of foreign bank entry in the Turkish banking sector during the 2007–2009 Global financial crisis

<abstract> <p>This paper provides insights on how foreign bank entry modes (acquisition vs. greenfield investment) in an emerging market (Turkey) influenced bank strategies during the 2007–2009 global financial crisis. Using a comprehensive dataset comprising twenty-nine accounting variables from Turkish banks' financial statements during 2005–2010, we find important differences between foreign-acquired banks and foreign bank branches in lending and sourcing funds. We find that foreign bank branches continued to support international trade by issuing import loans during 2007–2009 global financial crisis, whereas foreign-acquired banks focused on issuing consumer and credit card loans. In terms of bank sourcing funds, we find that foreign-acquired banks were able to continue to use foreign currency deposits of Turkish residents and local interbank funding including participation (Islamic) banks. Foreign bank branches, on the other hand, relied on sourcing funds from international interbank funding and foreign currency deposits of residents abroad, which led to the necessity for them to change their strategies because of funding shortage in international markets. Our results show that the presence of foreign banks in Turkish banking sector enabled the continuity of bank lending activities in host market during the turmoil of 2007–2009 global financial crisis. Our findings on foreign bank entry mode provide new evidence and have important implications for both policy makers and practitioners in emerging markets.</p> </abstract>

Chinese FDI in Poland and the Czech Republic – inflows, determinants and challenges

Purpose: The objective of this paper is to present Chinese investment flows and the nature of participation, to analyze the differences between host countries, and to identify the determinants of Chinese FDI in Poland and the Czech Republic. Design/methodology/approach: Comparison of the specifics of Chinese direct investments in Poland and the Czech Republic. Findings: The nature of Chinese investment in Europe is changing. After years of being dominated by mergers and acquisitions, Chinese investment in Europe is now more focused on greenfield projects. In 2021, greenfield investments reached €3.3 billion, the highest ever recorded, and accounted for nearly one- third of all Chinese FDI. More recently, the volume of Chinese FDI in Europe has reached the level of European FDI in China (now constrained by restrictions and risks). It matched the level of FDI by Chinese companies in the United States before declining over the past two years, generally due to Covid-19 and the war in Ukraine. Chinese economic presence in Europe can be divided into three areas based on size, destination, and type of acquisition: The core of Europe is formed by the three major target countries (Germany, UK, France), where more capital-intensive investments are made, followed by other Western European countries (EU-15). The new member states (NMS), which joined the EU in 2004, 2007 and 2013, as well as the Western Balkan countries in the process of accession, are associated with China in the 16+1 format (with the exception of Kosovo) and form another gateway to Europe. Due to fewer market opportunities, they receive less direct investment, but China is building infrastructure (ports, highways, railroads) - segments of the Silk Road that will bring Chinese products to mature EU markets (Richtet, 2019). It is unlikely that Chinese investment in Europe will recover in 2023. The Chinese government is expected to maintain strict capital controls, financial retrenchment, and Covid-19 restrictions. The war in Ukraine and the expansion of regulations to monitor and control Chinese investments in the EU and the UK will cause additional difficulties. Originality/value: The article could be an attempt to answer the question of combining macroeconomic and institutional factors to better understand the internationalization of firms (Dunning, Lundan, 2008). There is no doubt, that the Covid-19 pandemic and the war in Ukraine made it necessary to deepen the study of the phenomenon of FDI, its inflows, determinants, and related challenges in a turbulent world. Keywords: foreign direct investments (FDI), People's Republic of China, Czech Republic, Poland, international relationships. Category of the paper: Research paper.

Direct Foreign Investment in the Central and Eastern European Countries in the Period of Political and Economical Destabilization

Goal – the main research query of the article regards whether the tendencies and mobility in the sphere of the FDI inflow to the CCEEs changed, in the existing conditions of the political and economic instability. Therefore, the purpose of the article is to evaluate the changes in the FDI level, dynamics and structure in the CCEEs in the conditions of geopolitical uncertainty resulting from the outbreak of the war in Ukraine, in comparison with the tendencies in the previous years. Research methodology – the first part of the article contains the analysis of the overview of the literature on the FDI conditioning in the CCEEs (the Czech Republic, Estonia, Hungary, Lithuania, Latvia, Poland, Slovakia and Slovenia) and the evaluation of the investment attractiveness in the light of the selected factors. The next part contains the analyses concerning the capital inflow in the form of FDI to the CCEEs which included the data regarding the FDI resources, the FDI recourses per capita, FDI inflow, including the number and value of greenfield investments. The analysed period covers the years 2012–2022. Score/results – when analysing the basic macroeconomic indicators characterising the economic conditions of CCEEs, it may be stated that those countries follow an economic development path where FDI has an important role. The inflow of foreign direct investment played a crucial role both in the transformation process of CCEEs’ economies and also influences their modernisation and development now. Originality/value – considerations and analyses conducted in the article allow to claim that geopolitical destabilisation affected the economies of the CCEEs, including the inflow of capital in the form of FDI, in two ways. On the one hand, it may be observed that those countries, as well as other countries in Europe, experienced deterioration of the economic conditions. Lower dynamics of the GDP growth and high inflation are typical problems of the analysed economies. However, despite that, the investment attractiveness of those countries remains high. The analysed economies constitute attractive locations for foreign investment, which is confirmed by the growing FDI inflow, the growing value of FDI per capita, or the growing value of greenfield projects.

Foreign Direct Investment and Labour Productivity: Relationship and Interconnection

The article aims to define the interconnection and interdependence of foreign direct investment (FDI) and labour productivity. The contributing factors of economic modernization, R&D spending, and production cost reduction to labour productivity growth are defined. The comparison analysis of FDI inflow, outflow, and labour productivity in the European Union countries is provided. The paper contributes to the empirical explanation of the relationship between labour productivity and FDI outflow and wage growth in certain sectors of the economy. The existence of higher wages in industries with a higher presence of joint venture foreign investments and industries with greater foreign participation was analysed. Greenfield investments are considered a stimulus for economic growth by the supply increase of both national and companies controllable by foreign proprietors. The sources of enhancing investment in R&D released by labour from economic sectors are proposed.

International project finance deals as indicators of productive cross-border investment: UNCTAD’s approach

International project finance (IPF) can channel private cross-border capital toward productive investments in (mostly) infrastructure sectors, especially where government budget constraints are tight. Moreover, it has recently gained importance as a tool to finance the Sustainable Development Goals (SDG) and bridge the large infrastructure gap for climate megaprojects. In such contexts, projects often require international capital along with expertise and credibility; they also require a project-specific risk allocation that IPF accommodates. This research note assesses project finance in the context of international productive investments, its link with other forms of international investment (mergers and acquisitions, and cross-border greenfield investments) in the data used, and its use in UNCTAD’s publications. Data is a lynchpin for analysis but is not unproblematic. The note explores incongruences and their impact. It also outlines UNCTAD’s conceptual choice to capture ongoing productive investments in infrastructure through project finance in the world economy.

Structure and evolution of the greenfield FDI network along the belt and road

Using bilateral greenfield investment projects data from 2003 to 2019 collected from fDi Markets, this study constructed the greenfield foreign direct investment networks along the Belt and Road (BR-GFNs). Based on a social network analysis, we investigated the structure of BR-GFNs at three levels. At the overall level, the BR-GFNs are characterized by small-world, reciprocity, and robustness. At the community level, the BR-GFNs form three communities: the east, south, and west. Lastly, at the national level, China, Russia, India, and Turkey occupy important positions in BR-GFNs, with relatively high resource control abilities. Moreover, we applied the quadratic assignment procedure to investigate the factors affecting the structural formation of the BR-GFNs. The results show that countries with less geographical, institutional, economic, and cultural distance, higher political affinity, and possibility of signing bilateral investment treaties are more likely to establish cross-border greenfield investments.

Selection of Investment Mode for Cross-border O2O Channel Construction Based on Cloud Model

In the era of rapid development of the Internet, cross-border electronic commerce is becoming more and more prosperous, and many enterprises are beginning to invest abroad in the form of cross-border online-to-offline (O2O) to explore foreign markets. Under this background, this paper focuses on the choice of foreign investment mode of enterprises when they build cross-border O2O channels, and establishes an appropriate evaluation system of investment mode for cross-border O2O channel construction. On the basis of the evaluation system, Cloud Model is used to analyze and compare Greenfield investment, Joint Venture investment and Merger & Acquisition investment, so as to determine the best investment mode of cross-border O2O channel construction for enterprises. Moreover, cross-border O2O channel management proposals are put forward. This paper can provide guidance and reference for Sichuan-style enterprises or other types of domestic enterprises to choose the investment mode when constructing cross-border O2O channels.

Location choices of Chinese greenfield investments across EU regions: the role of industry and country-of-origin agglomerations

ABSTRACT The presence of Chinese multinational enterprises (MNEs) in Europe is on the rise, yet they concentrate in specific regions. Traditional spatial explanations of this clustering refer to the co-location of foreign and local firms in the same or related sectors (‘industry agglomeration’). Nonetheless, Chinese investors may also favour locations with a presence of Chinese firms and ethnic communities (‘country-of-origin agglomeration’). We investigate the combined role of both agglomeration typologies by using data on 1307 Chinese investments in 176 NUTS-2 regions during the period 2009–19. While both agglomerations matter in general, we find a substitution effect of country-of-origin agglomeration offsetting the benefits of industry agglomeration.

Motivations behind SME greenfield investment in emerging markets

PurposeThis paper identifies the motivations for small- and medium-sized enterprises (SMEs) when they undertake greenfield foreign direct investment (FDI) into an emerging market. It elucidates the factors that influence SMEs to choose a fully equity-based investment despite the significant risks and commitments involved with greenfield FDI.Design/methodology/approachThis exploratory study uses case study research based on interviews conducted with managers and founders of 16 German SMEs that have established greenfield operations in Malaysia.FindingsBuilding upon the transaction cost theory, five major motivations are identified that drive greenfield choice among the SMEs. The results imply that SME motivation for greenfield is derived from a combination of strategic asset-seeking determinants and culturally driven reactions to external and behavioral uncertainty. The results also ascertain that these motivations have less to do with the size and revenue of the firm, but hinge on the SMEs’ inner antecedents such as asset specificity, international experience, proprietary knowledge and ownership mode.Originality/valueThe findings clarify the literature on equity-based entry mode for SMEs in emerging economies, enabling a closer understanding of the organizational and dynamic experiences and an overview of the auxiliary competencies these companies have to compete in the global market. The conceptual insights and empirical evidence derived from this study contribute to the intellectual discourse and managerial implications in the field of internationalization strategies of SMEs, particularly from developed countries into emerging markets via greenfield FDI.

Chinese cross-border acquisitions: stylised facts and new directions

PurposeChinese multinational enterprises’ (MNEs) unprecedented, aggressive cross-border mergers and acquisitions (CBMAs) have led to several studies examining Chinese CBMAs, which importantly has also led to some degree of “theorising”. This study aims to undertake a “non-theoretical” fact-finding exercise before any theorising and empirical “causal” examination for a better understanding of the phenomenon (the rise of Chinese CBMAs).Design/methodology/approachThis study uses a “stylised facts” approach which documents “empirical regularities” concerning Chinese CBMAs and thus guides new research questions.FindingsSeveral facts are documented. Firstly, both the value and frequency of Chinese CBMAs are catching up to greenfield investments, with CBMA deals being larger in scale but lower in frequency. Secondly, Chinese CBMAs show a global reach away from the regional orientation of their early years. Thirdly, Chinese MNEs are possibly transforming their value chain with industrial upgrading as an aim. Fourthly, Chinese “full” acquisitions of targets have surged, especially in OECD countries, suggestive of Chinese MNEs’ “radical” acquisition approaches.Originality/valueThe gathered facts lend support to the view of the need for such fact-finding exercises to explicate and shed “new” light on the phenomenon (beyond our “current” views/beliefs). An understanding of the underlying trends beyond bare facts can also identify new knowledge, which can in turn provide new directions for research.

The FDI-spawned technological spillover effects on innovation quality of local enterprises: evidence from industrial firms and the patents in China

ABSTRACT Foreign direct investment is a topic of crucial importance for emerging market countries for capital accumulation, innovation and sustainable development. From the perspective of technological innovation, the article explores how ‘desirable’ the FDI is in stimulating domestic innovation. Using industrial firm-level data from 1998 to 2013 combined with patent database from China National Intellectual Property Administration and patent citations from Google Patents, the article captures the significant impact of innovation quality of regional FDI on the innovation quality of local firms with both multi-fixed effects and instrumental variable estimations, which are proved to be reliable with robustness checks. Further, under different entry modes, the article finds that M&A FDI plays a more positive role in spillovers compared with greenfield investment. Finally, the article explores the upstream and downstream linkage benefits and intra-industrial benefit from FDI innovation, which shows that the intra-industrial benefit, or the demonstration effect is prominent. Our article renders a more direct micro evidence of FDI spillovers and sheds light on FDI attracting policies.

Does the export-to-import ratio affect environmental sustainability? Evidence from BRICS countries

The study aims to examine the effects of trade balance, economic growth, green field investment, energy use, financial development, and urbanization on environmental sustainability in BRICS countries. This study proceeds to estimate the long-term association using the fully modified ordinary least square (FMOLS) and the dynamic ordinary least square (DOLS) panel estimation methods for the years 1991–2020. This empirical study finds that the ratio of exports to imports has a negative effect on environmental degradation. This indicates that increasing the trade balance eventually leads to environmental sustainability, which finally improves living standards and environmental conditions in the BRICS countries. The findings further show that green field investment and financial development substantially improve environmental sustainability, but energy use, urbanization, and economic growth desperately negatively affect environmental sustainability. Additionally, this research finds a unidirectional relationship of environmental sustainability with trade balance, green field investment, energy use, urbanization, and economic growth rate. This study states how BRICS countries can be protected through trade balance controlling environmental degradation. Thus, this research provides improved orientations to the policymakers of BRICS countries to design policy in favor of the environment.

해외직접투자의 지역 유치 및 선정을 위한 수출경쟁력 분석: HS8501을 중심으로

Export competition is often conceptualized as most likely among countries targeting the same overseas markets. Export competition, that is, is important because with globalization, more and more countries become outward-looking and compete globally. However, this conceptualization overlooks the fact that domestic markets are the key to the success of many domestic firms. In addition to export competition, import competition, that is, the competition with foreign firms for domestic markets, should also play an important role in businesses’ daily life and related domestic politics. However, the considerable part of the received FDI inflows through acquisitions and greenfield investments were directed in the national banking sector, that together with higher government control contributed to a greater efficiency and restructuring of the domestic banking sector. The aim of this paper is to choose most suitable greenfield FDI inflows for “HS8501-electric motors/generators” product group. Tis study analyzes HS8501, which not only shows a continuous trade deficit, but also has a widening deficit. In addition, unlike the existing approaches through CAD or CAF, we take an approach that attracts greenfield FDI. For this, greenfield investment countries are selected by analyzing the export competitiveness of HS8501 to Korea’s major exporting countries, the competitiveness of major countries’ HS8501 global market, and the structure of the import market.

Analysis of Economic Activity of Foreign Direct Investors in Latvia

The aim of this article is to investigate the activity of foreign direct investors in Latvia and find out the main source of financing for foreign investors - new investments or reinvested earnings. To achieve the set goal, the methodology of the Sixth Edition of the International Monetary Fund's Balance of Payments and International Investment Position Manual was used to define the types of foreign direct investment (FDI). This methodology was adapted to Latvian data. At the request of the author, Lursoft IT Ltd selected business data on all registered companies with foreign capital in Latvia since 2005 and aggregate data were used in the analysis. Foreign direct investment in Latvia flows mainly in the form of reinvested earnings, due to the profit earned from operating activities in Latvia. While new investments or greenfield investments in equity is lower compared to the amount of reinvested earnings.

The location of cross‐border and national mergers and acquisitions within the United States

AbstractResearch on the location choice of foreign direct investment (FDI) focuses on the choice between countries. The within‐country location choice is either not analyzed at all or restricted to greenfield investments only. The majority of FDI, however, takes the form of cross‐border mergers and acquisitions (M&As). We develop and test a pair of hypotheses regarding location‐target selection for both cross‐border and national M&As across the United States, expecting differences in line with the liability of foreignness argument. Using a detailed firm‐level data set for M&As in the period 1985–2012, we compare location choices of cross‐border versus national M&As. We find that cross‐border M&As are more spatially concentrated, and tend to sort into larger agglomerations than national M&As. This finding holds both for urban agglomerations in isolation, as well as for agglomerations that take the economic geography of the United States into account.

EFFECTS OF FOREIGN DIRECT INVESTMENT ON THE ECONOMY AND ENVIRONMENT

Classical theories linking increased CO2 emissions to a country's economic development supported by foreign direct investment in industrial plants, coking plants, ironworks, shipbuilding, and other heavy industries marked the 20th century, with large MNCs seeking refuge in underdeveloped economic development. The second millennium of Croatia began with deindustrialization, both due to the extinction of large state-owned industrial losers and due to transformation and privatization, where the interest of capital was in the financial and tourism sectors. This does not mean that FDI was not present, but the expected greenfield investments were missing, especially after joining the EU. To what extent FDI has influenced the increase in carbon emissions is the subject of research in this paper.

Mergers and its Effects in Select Indian Iron and Steel Companies - A Study

As an important sphere of corporate strategy, Mergers and Acquisitions have been undergoing a sea change within the economic set -up since liberalization in India. Massive growth in both Foreign Direct Investment and Foreign Institutional Investors has been witnessed by the economy. Rather than Greenfield Investment, a substantial fraction of the growth in FDI during the late 1990s tends to rapid increase of cross-border deals in form of Mergers and Acquisitions. This study has attempted to identify the performance of some selected Indian Iron and Steel Companies as a regime study through applying techniques like Economic Value Added and Operating Profit.

The Impact of State Visits and Prior Investments on the Investment Location of Chinese Firms

We analyze the impact of state visits and prior investments on the investment location of Chinese firms. We argue that these government and business networks should have a positive effect on investment decisions. Prospective entrants decide about investment locations not only on the basis of economic and institutional characteristics of host countries but also learn about the attractiveness of alternative locations through state visits and previous investors. We analyze greenfield investments by Chinese firms between 2003 and 2019 and find broad support for our conceptualization in an analysis of more than 8000 investments. State visits are thereby shown to have a shorter term effect than prior investments by compatriot firms. Our results also show that state visits are comparatively more important in institutionally weaker countries whereas prior investment is relatively more important in institutionally stronger countries.

Behind China’s Overseas Food Investments: A Tale of Two Dairies

ABSTRACT China’s wave of outbound foreign direct investment (OFDI) in food production has created vast commercial opportunities for host countries but has also raised concerns about political dependence on the Chinese market, charges of commodity expropriation, and concerns over the loss of food brands and technologies. While most attention is focused on the political drivers behind Chinese investments in grain production, this article examines the dairy industry, a sector that answers both to policy, and to productive and consumer forces. Using records from the Shanghai Stock Exchange, this article examines the rise of OFDI by China’s dairy giants as the result of the consolidation of the domestic industry, the political promotion of agrarian globalisation, and the complex consumer appeal of foreign foods. Against this background, two contrasting case studies show how the aims and strategies of dairy investments have changed. Guangming’s disastrous 2014 purchase of a controlling stake in Israel’s Tnuva dairy cooperative capped off the initial rush for branded assets. In contrast, the China Animal Husbandry Group’s successful investment in the Mataura Valley Milk plant in New Zealand represents the subsequent trend towards greenfield investments in productive capacity.

The Belt and Road Initiative, political involvement, and China's OFDI

AbstractThe Belt and Road Initiative (BRI) is an important strategy for China. This study examines the effect of political involvement on firms' outward foreign direct investment (OFDI) in belt‐road countries after the BRI. Using merged Chinese nonfinancial listed firm data, the fDi Markets database, and the Thomson One database (formerly known as SDC Platinum) for the period 2008–2018, we find that political involvement has positive effect on firms' OFDI in belt‐road countries after the BRI. Furthermore, we find that the positive effect is heterogeneous across state‐owned enterprises (SOEs) and non‐SOEs. Political involvement has a positive effect on M&A for SOEs and Greenfield investment for non‐SOEs in belt‐road countries after the BRI. Our findings suggest that political involvement promotes firms' OFDI in belt‐road countries after the BRI and is helpful to the macro‐policy implementation.