Mergers & Acquisitions Or Newly Start-ups ?

With the acceleration of the global economic integration process,more and more enterprises began to move towards the international market,and the international operation has gradually become the strategic behavior of enterprises to participate in the global resource allocation and value chain integration.The Outward Foreign Direct Investment(OFDI)is an important part of the “Going Out” strategy,which is not only important to the promotion of international competitiveness of Chinese enterprises,but also can not be ignored for China's international influence and future economic development.Compared with the western developed countries,China's foreign direct investment is still in the early stage,and the development of information technology and the Internet has led to great changes in the international market.Therefore,what kind of investment mode have to take for entering overseas markets has become an important research topic.Based on the firm heterogeneity perspective and evolutionary game theory,this research examines how productivity difference between the two sides of Mergers & Acquisitions affects the OFDI investors' entry mode choices.By the game model of capital-intensive enterprises and labor-intensive enterprises' OFDI entry mode selection is built on Hotelling model,it is analyzed that the evolutionary model of the two types of enterprises' strategic decisions on the OFDI entry modes under the variation of productivity difference among the two sides of Mergers & Acquisitions.In the mean time,the concept of “host country preference” is introduced into the Hotelling dynamic evolutionary game model on the basis of the original theoretical analysis model,investigating the relationship between the host country preference for the newly start-ups of OFDI and the choice of foreign direct investment entry mode of enterprises.The research results are as follows:Firstly,the market will reach equilibrium which capital-intensive enterprises and labor-intensive enterprises all choose M&A mode when the productivity difference is small;However,when the productivity difference is large,capital-intensive enterprises which have high intensity of knowledge and technology and some powerful labor-intensive enterprises will still choose M&A mode,the other labor-intensive enterprises will enter overseas market through newly start-ups due to the intensity and structure of production factor which has a critical impact on the entry mode choice of OFDI.This implicates that the OFDI mode choice of enterprises belonging to different industry is different from each other because of their varied intensity and structure of industrial factor.Secondly,in the process of enterprises foreign direct investment,if the host country has a strong preference for the newly start-ups,and the policy support provided(subsidies,investment conveniences,etc.)is large enough,the market will reach a s table state of evolution that capital-intensive enterprises and labor-intensive enterprises all enter overseas markets through the newly statrt-ups.It means that the greater policy support and investment convenience of the host country government effectively promotes multinational companies enter the overseas market via new investment.On the other hand,if the preferential policy support(subsidies,investment conveniences etc.)that foreign investors of newly start-ups can obtain is smaller(or not enough),the host country preference has no significant promotional effect on the new investment of OFDI.In the end,this study chooses some cases of foreign direct investment activities to give an example of the research results,and conduct relevant discussions.