Technology Transfer and Competition: Does Mode of Foreign Entry Matter?

Greenfield FDI is often regarded as having more beneficial effect on the host economy than M&A. However, recent evidence shows that there may not be such a great difference between the two modes. This paper empirically tests some theoretical conclusions regarding entry mode decision and technology transfer. The results show that cross border M&A is more likely to occur, the lower the technology transfer cost. Also, the likelihood of M&A occurring increases with competition when competition level is low and decreases with competition when competition level is high. The results were however not statistically significant, suggesting that differences between the two entry modes are not very strong in practical terms.