شباهت ها و تفاوت های میان M & Aبین مرزی و عوامل تعیین کننده FDI سبز: شواهدی از آسیا و اقیانوسیه

Firms choose either cross-border M&A or greenfield foreign direct investment (FDI) when expanding their operations overseas. In this study, by focusing on Japanese firms pursuing FDI in emerging countries in Asia and Oceania, we provide empirical evidence of the similarities and differences in cross-border M&A and greenfield FDI determinants. We derive the following four main conclusions. First, an increase in host-country population size and decreases in per capita income and corporate tax rates generally attract both inward cross-border M&A and greenfield FDI to the host country. Second, however, a home-country firm tends to choose cross-border M&A rather than greenfield FDI when the host country sufficiently implements shareholder rights laws and the firm tends to choose greenfield FDI rather than cross-border M&A when the host country adequately enforces intellectual property rights laws. Third, a firm tends to choose greenfield FDI when the firm already has regional networks in the host country and choose cross-border M&A when the purpose of the firm's overseas operations is to establish sales distribution channels. Finally, a firm pursuing cross-border M&A experiences higher cumulative abnormal returns in its stock prices following the investment, while a firm pursuing greenfield FDI experiences increases in its stock prices immediately before the investment.

According to the United Nations Conference on Trade and Development, total global foreign direct investment (FDI) exceeded US$1.5 trillion in 2011, with a significant proportion of the increase attributed to high-growth emerging economies. The background of this FDI trend is an acceleration in business globalization driven by the promotion of the free trade and investment policies of national governments coupled with the recent dramatic growth in emerging economies. The diversification of foreign market operations is now an essential firm strategy for pursuing profit maximization in this era of globalization, and thus whether firms choose cross-border M&A or greenfield FDI in order to expand their operations overseas is also a crucial managerial judgment. In response to the dramatic increase in cross-border M&A over the past decade, a number of researchers examine the influencing factors for such M&A investment decisions. Nocke and Yeaple (2007), for example, find that the international production factor mobility of home-country firms is a determinant of cross-border M&A, while Giovanni (2005) and Erel et al. (2012) assert that the level of the development of the host countries' capital markets and legal environments are determinants. Further, although LaPorta et al. (2006) do not directly examine the determinants of cross-border M&A, they find that the legal environment concerning investor protection and capital market development are positively related. Head and Ries (2008), Uysal et al. (2008), and Ahern et al. (2012) conclude that geographical distance, similarity of native language, and historical relationship between the two countries are determinants of cross-border M&A, respectively. Finally, Ferreira et al. (2009) assert that the probability of incoming cross-border M&A in the host country increases as its overall foreign ownership ratio increases. As Neary (2009) concludes after reviewing the theoretical literature, previous studies implicitly assume that greenfield FDI accounts for the majority of total FDI. These studies of greenfield FDI regard intellectual property rights (IPR) as a major determinant of firms' decisions to expand overseas. Previous studies investigate the relationship between the legal environment concerning IPR and FDI inflows in emerging countries but present conflicting results. For example, the theoretical studies by Helpman (1993), Maskus and Penubarti (1995), Glass and Saggi (2002), and Lai (1998) all assert that an enhancement in IPR legal protection laws decreases FDI inflows, whereas those by Braga et al. (1998), Javorcik (2004), and Branstetter et al. (2011) argue the opposite. On the other hand, the research by Lee and Mansfield (1996), Maskus (1998), Smith (2001), Rafiquzzaman (2002), Park and Lippoldt (2005), Branstetter et al. (2006), and Nair-Reichert and Duncan (2008) find both positively and negatively signed coefficients regarding the relationship between IPR protection laws and FDI inflows in host countries. However, although studies of both cross-border M&A and greenfield FDI determinants have increased in recent years, those analyzing the similarities and differences between those determinants are still generally lacking.1 By recognizing this void in the current literature, this paper therefore contributes to the existing literature by examining these determinants by type of FDI and, consequently, by evidencing the heterogeneity of cross-border M&A and greenfield FDI determinants, which have so far received little scholarly attention. This study examines whether common factors lead to both cross-border M&A and greenfield FDI and assesses whether such factors influence one investment direction over the other. Specifically, we focus on nations in Asia and Oceania as host countries (i.e., Indonesia, Malaysia, Thailand, the Philippines, Hong Kong, Australia, New Zealand, Singapore, South Korea, Taiwan, China, and India) and Japanese firms as home-country investors. The remainder of the paper is organized as follows. In Section 2, we formulate the hypotheses and empirical strategy and describe the methodology used to test these hypotheses. In Section 3, we present our empirical results. Section 4 discusses our new empirical evidence and concludes.

Based on the empirical evidence presented herein, we can draw the following conclusions. Some host-country variables promote both types of FDI, but the home-country firm's preference of the type of FDI is determined by the host-country's legal environment and individual firm-level variables. The existing literature shows evidence of the determinants that encourage cross-border M&A and greenfield FDI, but this study is the first to present the similarities and differences of such determinants using a common sample. As for similarities in cross-border M&A and greenfield FDI determinants, our results regarding the relationship between the country-level variables and FDI (Hypothesis 1) are entirely consistent with the findings of the existing literature. Our study's results suggest that per capita GDP is significantly and negatively related to both cross-border M&A and greenfield FDI decisions. Although we originally hypothesized that the sign of the per capita GDP coefficient is positive, unit labor cost and household income are in general correlated in emerging host countries, which negatively influence FDI decisions. Our empirical results for the country-level variable coefficients also yield valuable insights. We find that in addition to per capita GDP, Population, and Corporate Tax all influence both cross-border M&A and greenfield FDI. Our first main conclusion, therefore, is that while these country-level variables commonly increase or decrease both types of FDI, they do not determine the firm's choice of either investment type. In other words, while the country-level variables employed in this study are required conditions to encourage FDI in the host country, they do not determine the type of FDI chosen by the home-country firm. Regarding differences in these two types of FDI determinants (Hypothesis 2), we find that whether changes in the legal environment influence a home-country firm's FDI decision depends on the aspect of the legal environment as well as on type of FDI. For instance, while cross-border M&A is not influenced by an enhancement of the host country's IPR protection laws, greenfield FDI is promoted by such an enhancement; these results are consistent with the conclusions drawn by Lai (1998), Branstetter et al. (2006), and Javorcik (2004). In the context of the recent dramatic increases in cross-border M&A, our empirical results suggest that enhancements of SHR protection laws are required. Our finding of a positive relationship between the legal environment concerning SHR protection and cross-border M&A supports the conclusions of Giovanni (2005). Indeed, Indonesia and the Philippines scored between four and five points on the IMD SHR scale and thus they belong to the lowest cohort of the 45 sample countries. On the other hand, Malaysia, Singapore, and India scored between six and seven points, paralleling the recent cross-border M&A increases in these countries.2 In terms of firm-level factors, we find that the existence of a regional network in the host country and home-country firm stock price are two major determinants in the decision whether to choose either FDI, but not both. Our results in Table 6 also show that Bilateral Trade influences both types of FDI, whereas Regional Networks, the variable intersecting Bilateral Trade and Regional Experience, only influence greenfield FDI ( Hypothesis 3). This finding occurs because Bilateral Trade is a country-specific variable, whereas Regional Experience, which pertains to the existence of operations in the host country, is a firm-specific variable. In other words, our empirical results suggest that firm-specific variables determine the choice of FDI once country-level variables have been converted into firm-specific variables. For instance, in 2010–2011, several Japanese brewery firms announced cross-border M&A deals with companies in Australia and Brazil. Although Japan, as a country, has significant bilateral export and import relationships with these two countries, the Japanese brewery firms in question do not have local distribution channels there. Accordingly, their acquisitions were based on their own decisions as individual firms. These cases are also consistent with our empirical results that show a positive relationship between Entry Purpose and cross-border M&A. The empirical results on the relationship between the home-country firm's stock price and FDI decision (Hypothesis 4) also provide important implications. We find that cross-border M&A is not influenced by firm stock price prior to the investment decision. Although these two variables are positively related, our results show that the investment decision rather induces the stock price change, not the other way around. A possible reason for this outcome is that many cross-border M&A deals by Japanese firms are aimed at acquiring new additional customers and responding to demand in host countries. Following such deals, the stock market expects an improvement in the financial performance of the acquiring firm, thereby confirming the positive relationship between stock price and cross-border M&A. How should we then understand how the above legal environment and firm-level factors work together to influence home-country firm FDI choice? The interpretation of our conclusions runs as follows. In contrast to greenfield FDI, cross-border M&A can dramatically increase a firm's sales network capabilities even in the short run, which can potentially lead to an improvement in its operating profit. If this were so, then all firms would have preferred cross-border M&A to greenfield FDI in the past. However, in reality, greenfield FDI still significantly outnumbers cross-border M&A, because the probability of completing cross-border M&A deal after an announcement is low. For instance, of the 243 cross-border M&A deals we originally obtained for our sample, 97 were terminated prior to completion. Ultimately, our dataset only included the 146 completed cross-border M&A deals. In short, based on our sample, cross-border M&A has an approximately 40% probability of incompletion. It is often thought that cross-border M&A is a ready-made international business strategy, while greenfield FDI is a tailor-made international business strategy for entering new foreign markets. In the ready-made strategy, although thorough due diligence is necessary to close a successful deal, such due diligence is not a sufficient condition, since unexpected environmental changes may affect the deal immediately after the transaction. In this regard, the tailor-made strategy of entry enables the home-country firm to cope with the host-country market more flexibly and thus have a higher probability of completion. The characteristics of cross-border M&A may also influence the firm's choice. Specifically, the legal environment concerning SHR protection is one of the factors that may influence this probability. The better the enforcement of SHR protection laws, the greater is the probability of firms choosing cross-border M&A because strong SHR protection by law enables the home-country firm to control the target host-country firm in order to achieve its ultimate purpose of market entry, even in the case of the ready-made strategy of entry. In the case of greenfield FDI, prior increases in the home-country firm's stock price positively influence a firm's investment decision. In other words, as firm value increases in the domestic market, the firm is more likely to enter a neighboring country through greenfield FDI. This probability rises if the firm already had local operations in the host country prior to the investment because a firm that is highly competitive in the domestic product or services market generally experiences stock price increases in its home country. These prior stock price increases encourage the firm to establish a new production base and sales network overseas. An acquiring firm's high market value in its home country affords it time and resources to successfully operate in the host country. Through greenfield FDI, the firm avoids the risk of withdrawal or termination that is otherwise present in cross-border M&A. Therefore, it does not choose cross-border M&A when it already has local networks in a host country. Indeed, market value may even decrease when cross-border M&A market entry is not accepted by capital market participants due to its low probability of completion or view of future poor performance in the post-merger period. On the other hand, market value can increase with the announcement of cross-border M&A when the future expected return of the deal makes up for the risk of incompletion. In this regard, a lower stock price before the FDI decision may be better than the risk of incompletion. In summary, the study contributes to the body of knowledge on this topic in four specific ways. First, our study shows evidence that the host country's population size, per capital income, and corporate tax rate are common determinants for inviting inward FDI. Further, we also show that the host country's legal environment and home-country individual factors determine either type of FDI, but not both. Second, we show that the host country's IPR protection law influences the incoming greenfield FDI but not the cross-border M&A decision of the home-country firm. By contrast, the host country's SHR protection law influences the incoming cross-border M&A but not the greenfield FDI decision of the home-country firm. Third, whether the home-country firm has past FDI experience in the host country influences the greenfield FDI decision but not the cross-border M&A decision. However, when the firm has no past FDI experience in the country, whether the purpose of the new entry is to establish a sales distribution channel is a major determinant of cross-border M&A. Fourth, the home-country stock price appears to influence both FDI decisions, but it increases immediately before and after the investment announcement for cross-border M&A, while a high stock price in the pre-investment period encourages the greenfield FDI decision. However, the following limitations must also be recognized in our study. We employ only two quantitative data to represent the legal environment of the host country due to data limitations. In emerging countries, especially, obtaining quantitative data on the prevailing legal environment is complex, but other legal environment factors may also influence incoming FDI. Whether host-country legal environment factors other than IPR and SHR protection laws influence FDI choice should thus be investigated by future research. In addition, we employ data on home-country Japanese firms and host countries in the Asia-Pacific region. Individual FDI deal-level data are also difficult to obtain. Thus, our result should be re-examined using other regional data as necessary.