Brownfield Entry in Emerging Markets

target firm as it is more beneficial to take over an existing firm's operations and niche compared to expanding on its own).

Secondly, this approach combines resources from both parties involved so that the foreign party dominates in the activities following integration.

''Brownfield investors often pursue strategic objectives that assign the acquired firm a clearly defined role within the MNE network, which may require the affiliate to pursue entirely new functions, product lines, or markets .''As seen above, the foreign company dictates the business practice from the point of integration onwards, which may cause dissatisfaction in the local company, and possibly provide a negative influence on the production process. However, positive effects of the foreign entry into a local market cannot be denied, either. Spillovers include impact on the balance of payment, employment and investment. The most important ones are knowledge transfer and diffusion that benefit not only the affiliate of the foreign investor, but its local business partners as well.

The potential of such impact will be greater the larger the technological gap between source and recipient economy, which makes it particularly relevant in emerging markets.

Foreign Direct Investment

Foreign direct investment means investing directly in production activities in other countries, by buying an existing company of similar profile there, or by founding new facilities of an existing business. This is done mostly by companies. Foreign direct investment was marked by a significant growth in the 1990s. In the beginning of 21st century, its growth has not been as noteworthy in the global economy, but the developing countries have been a steady point of interest when it comes to foreign direct investments. Despite suspicions towards this form of investment by