We examine the effects of greenfield FDI and cross‐border mergers and acquisitions (M&As) on total factor productivity (TFP) in developed and developing host countries of FDI. Using panel data for up to 123 countries over the period from 2003 to 2011, we find that greenfield FDI has no statistically significant effect on TFP, while M&As have a positive effect on TFP in the total sample. Greenfield FDI and M&As both appear to be ineffective in increasing TFP in the subsample of developing countries. In contrast, M&As have a strong and positive effect on TFP in the subsample of developed countries.