HCMs can target investments by entry mode, such as exhibiting a preference for greenfield investments, M&As, sales offices, resources extraction or the establishment of R&D centres. Targeting by entry mode can be a reasonable strategy as different entry modes have different implications for home-country effects. For example, greenfield investments can be important for enhancing overseas production and market access that could boost home-country exports; M&As and R&D centres are often vehicles for accessing foreign know-how that could help enhance home-country technological capabilities; and resources extraction projects have the potential of enhancing home-country resources security.
Key insights
- HCMs can be targeted at investment projects that use a particular entry mode, such as greenfield investments, M&As, resources extraction, R&D centres or sales offices.
- Targeting by entry mode often involves HCMs offering financial support.
Interactions
B5) Entry mode: Home-country measures can be targeted at investments with specific entry modes, such as greenfield investments, M&As, resources extraction, R&D centres or sales offices.
C4) Financial support: Financial support can specifically target OFDI with specific entry modes, such as greenfield investments or M&As.
C5) Fiscal support: Fiscal HCMs can support OFDI with specific entry modes, such as M&As.
Existing Country Practices
Targeting by entry mode in India: The Eximbank offers loans for investments in overseas joint ventures, wholly foreign-owned enterprises and equity investments in other companies.
Targeting by entry mode in Italy: Simest engages in equity participations that involve the establishment of a company, M&A transactions or capital injections.
Targeting by entry mode in Japan: JBIC supports investments with various entry modes, including resources extraction projects and M&As.
Targeting by entry mode in Malaysia: MIDA offers a tax incentive for acquiring a foreign company when this results in a parallel establishment of a manufacturing or services company in Malaysia, or when acquired technologies are being used in Malaysia.
Targeting by entry mode in Singapore: Enterprise Singapore’s Enterprise Development Grants (EDGs) support companies access overseas markets by M&A or overseas marketing presence. Its Enterprise Financing Scheme (EFS) finances the acquisition of overseas companies when this is aimed at internationalisation.
Targeting by entry mode in Spain: Cofides financing is available to support the creation of a new company, the expansion of existing facilities, acquisitions or the establishment of a commercial office abroad. ICO’s direct financing facilities are available in particular for new investment and the expansion of existing activities. Acquisitions and shareholdings are funded if they offer more than a mere financial investment.