What is Green Field Investment?

• A. A form of foreign direct investment where a parent company starts a new venture in a foreign country by constructing new facilities from the ground up.
• B. A license agreement allowing a foreign partner to use technology.
• C. Acquisition of an existing foreign company.
• D. Franchising a local business.

Answer: (A)

Green field investment is a form of foreign direct investment where a parent company starts a new venture in a foreign country by constructing new facilities from the ground up. It involves creating new physical assets—like factories, offices, and distribution centers—and often hiring local staff and transferring technology and management practices to build an entirely new subsidiary. This is different from licensing, which just grants rights to use technology; from acquiring an existing foreign company, which buys a preexisting operation; and from franchising, which expands a business model under a brand. A real-world example would be a company building a new manufacturing plant in another country, rather than purchasing an existing company or simply licensing its technology.