The majority of cross-border investment is in the form of mergers and acquisitions rather than greenfield investments. Firms prefer to acquire existing assets rather than undertake greenfield investments because (1) mergers and acquisitions are quicker to execute than greenfield investments; (2) it is easier and perhaps less risky for a firm to acquire desired assets than build them from the ground up; and (3) firms believe that they can increase the efficiency of an acquired unit by transferring capital, technology, or management skills.

1) Does an acquisition of company by a foreign investor contribute to economic growth/development in the receiving country?

2) Say you are a small county in Mississippi that wants to develop its local economy. There is a foreign investor that is willing to build a greenfields $50 million autopart assembly plant in the country and there is a foreign investor that will buy a lumber producing company also located in the country, also for $50 million. Which should the county officials support. What kinds of incentives would be appropriate in each case.