Optimal Market Entry Modes for Multinationals: Export Trade, Greenfield Investment, MA or Joint Venture

摘要

The purpose of this paper is to formalize the choice of market entry modes for an individual multinational enterprise among export trade, Greenfield investment, M&A and a joint venture. We assume that for M&A and a joint venture to yield synergies the participating firms had to make additional investments. We have found that there exists a strong interdependence among the different modes of FDI. Specially, even if Greenfield investment is a viable option, the multinational may prefer a joint venture to M&A, and M&A to Greenfield investment, provided that M&A and joint venture both involve sufficiently low fixed costs. The reason is that the profitability of Greenfield investment both reduces the acquisition price in the case of M&A, and gives local firms an incentive to agree to a joint venture.