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Greenfield Investment

May 29th, 2007

The ‘Greenfield Investment’ name comes from the idea of building a facility literally on a “green” field, such as farmland or a forest. Over time the term has become more metaphoric.

In Greenfield Investment a parent company starts a new venture in a foreign country by constructing new operational facilities from the scratch or this is the investment in a manufacturing plant, office, or other physical company-related structure or group of structures in an area where no previous facilities exist.In addition to building new facilities, most parent companies also create new long-term jobs in the foreign country by hiring new employees.   

This is opposite to a brown field investment where a site previously used for a “dirty” business purpose, such as a steel mill or oil refinery, is cleaned up and used for a less polluting purpose, such as commercial office space or a residential area. When a company or government entity purchases or leases existing production facilities to launch a new production activity. This is one strategy used in foreign-direct investment. 
 
Green field investments occur when multinational corporations enter into developing countries to build new factories and/or stores.

Developing countries generally offer prospective companies tax-breaks, subsidies and other types of incentives to set up green field investments. Governments often see that losing corporate tax revenue is a small price to pay if jobs are created and knowledge and technology is gained to boost the country’s human capital.

Entry Filed under: Greenfield Investment