Brownfield Entry in Emerging Markets

Reading:

Brownfield Entry in Emerging Markets
Author(s): Klaus E. Meyer and Saul Estrin

Source: Journal of International Business Studies, Vol. 32, No. 3 (3rd Qtr., 2001), pp. 575-584

Definitions

Greenfield: A Greenfield project gives the investor the opportunity to create an entirely new organization specified to its own requirements, but usually implies a graduate market entry. It is a start-up investment.

Acquisition: An acquisition facilitates quick entry and immediate access to local resources, but the acquired company may require deep restructuring to overcome a lack of fit between the two organizations.

Brownfield: A Brownfield is a foreign acquisition undertaken as part of the establishment of a local operation. From the outset, its resources and capabilities are primarily provided by the investor, replacing most resources and capabilities of the acquitted firm. It is a hybrid mode of entry.

Two frameworks establish determinants of entry mode choice

  1. Resource requirement based on transaction and integration costs

A Model of Entry Mode Choice

Managerial applications: Decide the entry mode based on transaction and integration costs and resources

Future research:

1. The relationship between institutional variation across countries and emergence of brown strategy.

2. Incorporate brownfield into analyses of both determinants of entry mode choice and the impact of entry modes on subsidiary performance

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