Economic Review, Vol. 76 No. 4, 2025.
Preliminary communication
https://doi.org/10.32910/ep.76.4.5
Impact of Greenfield Investment and M&A on the Host Country’s Economic Growth: An Assessment of the EU Member Countries
Dražen Derado
Darko Horvatin
Abstract
Empirical literature regarding the ultimate effects of foreign direct investment (FDI) on host countries’ economic growth does not reach a unanimous conclusion. To fill the gap, this paper differentiates greenfield investments from mergers and acquisitions (M&A) and focuses on the host country’s innovativeness. A total sample of 25 member countries of the European Union (EU) over the period 1999-2018 has created a balanced panel dataset, which made it possible to analyse the separate effects of greenfield investment and M&A on economic growth. Panel data analysis with fixed effects, corrected for groupwise heteroskedasticity and cross-sectional correlation, confirms that different types of FDI generate different effects on economic growth and concerning the host country’s innovation capacity. More specifically, M&A achieve the strongest contribution to economic growth in countries with stronger innovation capacities, while greenfield investments add more to economic growth in countries lagging behind in innovation.
Keywords
FDI; M&A; greenfield investment; innovativeness; EU.
Hrčak ID:
334022
URI
Publication date:
25.7.2025.
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