what is a green field investment 
a green field investment is a type of foreign direct investment fdi in which a parent company creates a subsidiary in a different country building its operations from the ground up in addition to the construction of new production facilities these projects can also include the building of new distribution hubs offices and living quarters investopedia sydney burnsthe basics of a green field investmentthe term green field investment gets its name from the fact that the company usually a multinational corporation mnc is launching a venture from the ground up plowing and prepping a green field these projects are foreign direct investments known simply as direct investments that provide the highest degree of control for the sponsoring company another method of fdi includes foreign acquisitions or buying a controlling stake in a foreign company however when a business takes the acquisition route it may face regulations or difficulties that can hinder the process green field investments carry the same high risks and costs associated with building new factories or manufacturing plants in a green field project a company s plant construction for example is done to its specifications employees are trained to company standards and fabrication processes can be tightly controlled this type of involvement is the opposite of indirect investment such as the purchase of foreign securities companies may have little or no control in operations quality control sales and training if they use indirect investment splitting the distance between a green field project and indirect investment is the brown field investment with brown field investing a corporation leases existing facilities and land and adapts them to suit its needs renovation and customization usually result in relatively lower expenses and quicker turn around than building from scratch risks and benefits of green field investmentsdeveloping countries tend to attract prospective companies with offers of tax breaks or they could receive subsidies or other incentives to set up a green field investment while these concessions may result in lower corporate tax revenues for the foreign community in the short run the economic benefits and the enhancement of local human capital can deliver positive returns for the host nation over the long term as with any startup green field investments entail higher risks and higher costs associated with building new factories or manufacturing plants smaller risks include construction overruns problems with permitting difficulties in accessing resources and issues with local labor companies contemplating green field projects typically invest large sums of time and money in advance research to determine feasibility and cost effectiveness tax breaks financial incentiveseverything done to specificationscomplete control of venturegreater capital outlaymore complex to planlonger term committmentas a long term commitment one of the greatest risks in green field investments is the relationship with the host country especially politically unstable one any circumstances or events that result in the company needing to pull out of a project at any time can be financially devastating for the business real world examples of green field investmentsgreen field investments can be measured well into the billions of dollars for example total planned expenditures for investments in the u s initiated in 2022 exceeded 85 billion this includes first year expenditures and future expenditures the u s bureau of economic analysis bea tracks green field investments that involve investments by foreign entities to either establish new businesses in the u s or expand existing foreign owned businesses 1historically mexico has been viewed as an attractive country for green field investments due in large part to its low costs of labor and manufacturing as well as its proximity to markets in the united states in april 2015 toyota announced its first green field project in mexico in three years costing 1 5 billion for the new manufacturing plant in guanajuato along with the plant the automaker planned to build or improve urban development to provide housing for the workers called toyota city 2