Factory (trading post)

Factory was the common name during the medieval and early modern eras for an entrepôt – which was essentially an early form of free-trade zone or transshipment point. At a factory, local inhabitants could interact with foreign merchants, often known as factors. First established in Europe, factories eventually spread to many other parts of the world. The origin of the word factory is from Latin factorium 'place of doers, makers' (Portuguese: feitoria; Dutch: factorij; French: factorerie, comptoir).

The factories established by European states in Africa, Asia and the Americas from the 15th century onward also tended to be official political dependencies of those states. These have been seen, in retrospect, as the precursors of colonial expansion.

A factory could serve simultaneously as market, warehouse, customs, defense and support to navigation and exploration, headquarters or de facto government of local communities.

In North America, Europeans began to trade with Natives during the 16th century. Colonists created factories, also known as trading posts, at which furs could be traded, in Native American territory.

European colonialism traces its roots from the classical era, when Phoenicians, Greeks and Romans established colonies of settlement around the Mediterranean, but ancient Greek and Phoenician emporia (ἐμπόρῐᾰ) also operated, specialising in trade in (for example) grain, slaves and luxury goods with hinterland peoples. However, trading "factories" were a unique institution^{[citation needed]} born in medieval Europe.

Originally, factories were organizations of European merchants from a state, meeting in a foreign place. These organizations sought to defend their common interests, mainly economic (as well as organized insurance and protection), enabling the maintenance of diplomatic and trade relations within the foreign country where they were set.

The factories were established from 1356 onwards^{[citation needed]} in the main trading-centers, usually ports or central hubs that prospered under the influence of the Hanseatic League and its guilds and its kontors (larger trading-posts). The Hanseatic cities had their own law system and furnished their own protection and mutual aid. The Hanseatic League maintained factories, among others, in England (Boston, King's Lynn), Norway (Tønsberg), and Finland (Åbo). Later, cities like Bruges and Antwerp actively tried to take over the monopoly of trade from the Hansa, inviting foreign merchants to join in.

Because foreigners were not allowed to buy land in these cities, merchants clustered around factories, like the Portuguese in their Bruges factory: the factor(s) and the officers rented the housing and warehouses, arbitrated trade, and even managed insurance funds, working both as an association and an embassy, even administering justice within the merchant community.