Greenfield and Brownfield Investments and Economic Growth: Evidence from Central and Eastern European Union Countries

Open access


Global foreign direct investment flows in terms of greenfield and brownfield investments have increased during the recent three decades resulting from the accelerating globalization. The considerable increases in the flows of foreign direct investment have many eventualities for the national economies. This study investigates the mutual effects among greenfield and brownfield (mergers and acquisitions) investments and economic growth in Central and Eastern European Union countries during the 2003–2015 period employing panel data analysis. The findings revealed that both greenfield and brownfield investments had positive influence on the economic growth, but the influence of greenfield investments was found to be relatively higher. Furthermore, one-way causality was discovered from both greenfield and brownfield investments to the economic growth.

Ashraf, A., Herzer, D., & Nunnenkamp, P. (2015). The effects of greenfield FDI and cross-border M&As on total factor productivity. World Economy, 39(11), 1728–1755.

Basher, S. A., & Westerlund, J. (2009). Panel cointegration and the monetary exchange rate model. Economic Modelling, 26(2), 506-513.

Borensztein, E., De Gregorio, J., & Lee, J.-W. (1998). How does foreign direct investment affect economic growth? Journal of International Economics, 45, 115-135.

Breusch, T. S., & Pagan, A. R. (1980). The Lagrange multiplier test and its applications to model specification in econometrics. Review of Economic Studies, 47(1), 239-253.

Calderón, C., Loayza, N., & Servén, L. (2004). Greenfield foreign direct investment and mergers and acquisitions: Feedback and macroeconomic effects. World Bank Policy Research Working Paper 3192.

Carrion-i-Silvestre, J. L., del Barrio, T., & López-Bazo, E. (2005). Breaking the panels: An application to the GDP per capita. Econometrics Journal, 8(2), 159–175.

De Mello, L. R. (1999). Foreign direct investment-led growth: evidence from time series and panel data. Oxford Economic Papers, 51(1), 133-151.

Dumitrescu, E. I., & Hurlin, C. (2012). Testing for Granger non-causality in heterogeneous panels. Economic Modelling, 29(4), 1450-1460.

Eberhardt, M., & Bond, S. (2009). Cross-section dependence in nonstationary panel models: A novel estimator. Retrieved from (03.04.2017)

Eren, M., & Zhuang, H. (2015). Mergers and acquisitions versus greenfield investment, absorptive capacity, and economic growth: Evidence from 12 new member states of the European Union. Eastern European Economics, 53(2), 99-123.

Harms, P., & Meon, P-G. (2014). Good and bad FDI: The growth effects of greenfield investment and mergers and acquisitions in developing countries. CEB Working Paper N° 14/021. Retrieved from (05.01.2017)

Iamsiraroj, S. (2016). The foreign direct investment–economic growth nexus. International Review of Economics and Finance, 42, 116-133.

Iamsiraroj, S., & Ulubaşoğlu, M. A. (2015). Foreign direct investment and economic growth: A real relationship or wishful thinking? Economic Modelling, 51, 200-213.

Luu, H. N. (2016). Greenfield investments, cross-border M&As, and economic growth in emerging countries. Economics and Business Letters, 5(3), 87-94.

Li, X., & Liu, X. (2005). Foreign direct investment and economic growth: An increasingly endogenous relationship. World Development, 33(3), 393-407.

Moon, H.-C., Kim, H.-K., & Lee, D.-H. (2003). Cross-border mergers & acquisitions: Case studies of Korea; China; and Hong Kong, China. Asia-Pacific Economic Cooperation Research Paper, 203-CT-01.6.

Neto, P., Brandão, A., & Cerqueira, A. (2010). The impact of FDI, cross border mergers and acquisitions and greenfield investments on economic growth. IUP Journal of Business Strategy, 7(4), 24–45.

Pegkas, P. (2015). The impact of FDI on economic growth in Eurozone countries. Journal of Economic Asymmetries, 12, 124–132.

Pesaran, M. H., Ullah, A., & Yamagata, T. (2008). A bias-adjusted LM test of error cross-section independence. Econometrics Journal, 11(1), 105-127.

Pesaran, M. H., & Yamagata, T. (2008). Testing slope homogeneity in large panels. Journal of Econometrics, 142(1), 50-93.

Solow, R. M. (1957). Technical change and the aggregate production function. Review of Economics and Statistics, 39(3), 312-320.

UNCTAD (2016). World Investment Report 2016: Annex Tables. Retrieved from (21.10.2016)

Wang, M., & Wong, M.C.S. (2009). What drives economic growth? The case of cross border M&A and greenfield FDI activities. Kyklos, 62(2), 316-330.

World Bank (2016). GDP per capita growth (annual %). Retrieved from (21.10.2016)

World Bank (2017). Foreign direct investment, net inflows (BoP, current US$). Retrieved from (10.04.2017)

Zhuang, H., & Griffith, D. (2013). The effect of mergers & acquisitions and greenfield FDI on income inequality. International Journal of Applied Economics, 10(1), 29-38.

Zvezdanović-Lobanova, L., Kračun, D., & Kavkler, A. (2016). Growth effects of cross-border mergers and acquisitions in European transition countries. Naše gospodarstvo/Our Economy, 62(4), 3–11.

Naše gospodarstvo/Our economy

Journal of contemporary issues in economics and business

Journal Information


All Time Past Year Past 30 Days
Abstract Views 0 0 0
Full Text Views 557 557 47
PDF Downloads 461 461 69