The Trojan Horses: Japanese and U.S. Presence in Europe

By Beer, Francisca M.; Cory, Suzanne N. | Review of Business, Spring 1994 | Go to article overview

The Trojan Horses: Japanese and U.S. Presence in Europe


Beer, Francisca M., Cory, Suzanne N., Review of Business


Currently, it is almost impossible to open a newspaper without encountering an item referring to the European Community (EC). This is hardly surprising. 1992 and the European Monetary Union gives the twelve countries(1) constituting the EC immense financial and economic power from which Japanese and American manufacturers should consider denial of access perilous.

Japanese and U.S. foreign direct investment (FDI) in the EC is the subject of this research. More specifically, we studied a number of European subsidiaries controlled by the largest Japanese and U.S. industrial corporations. The Japanese companies were selected from Fortune's 1990 list of the 150 largest Asian companies in 1989. The U.S. companies were drawn from Fortune's 1990 list of the 500 largest U.S. companies. We then achieved two ends: we assessed the actual position of the largest Japanese and American companies in the EC, and we compared the approaches used by these firms to enter the EC.

The rest of this paper is organized into four sections. Section one presents a brief overview of the theory of FDI and discusses Japanese and U.S. FDI strategy. Section two discusses the samples and the methodology used. Section three presents the results obtained. Section four summarizes our findings.

Japanese and American Foreign Strategy

It was approximately twenty years ago that Hymer (1970) wrote his seminal article on FDI and multinational enterprises (MNEs). Since then, the literature has expanded substantially.

One important explanation for the presence of FDI and MNEs is based on the theory of industrial organization. According to Caves (1971), MNEs are oligopolists having intangible capital in the form of trademarks, patents, special skills, and/or other organizational abilities. When this intangible capital is inseparable from the firm, corporations may attempt to acquire control directly via the establishment of foreign affiliates. The firm advantages must also be monopolistically held. According to Giddy (1987), without this type of market imperfection FDI would not occur, as national firms would perform better by staying in their home market. Consequently, the presence of FDI and MNEs is the result of the existence of market imperfections.

These market imperfections can be related to product and factor markets or to financial markets. They also include government regulations and control (tariffs and capital control) that impose barriers to free trade. Yet market failure, i.e. market imperfection, is not sufficient in justifying FDI. Local firms have inherent cost advantages over foreign firms, so accordingly, MNEs can survive abroad only if their advantages cannot be purchased or duplicated by local competitors.

Multinational enterprises have different strategies to protect themselves from competitive threats: some rely on product innovation, others on product differentiation. Still others use cartels and collusion to protect themselves. Japanese and U.S. companies' foreign strategy has traditionally been quite different, perhaps as different as the two countries. However, these differences have tended to diminish since the 1970s.

Since the mid-1930s, U.S. foreign economic policy has generally been to perpetuate freedom of FDI. After World War II, U.S. companies were strongly encouraged to aid in European reconstruction. This encouragement continued throughout the 1950s as a method of reducing the "dollar shortage" of foreign countries. Accordingly, the U.S. accounted for much of the explosion of FDI in the world. The growth rate of U.S. FDI worldwide averaged slightly less than 10 percent annually during the 20-year period of 1960 to 1981. According to Weekly and Aggarwal (1987), this rate of increase was greater than the average annual growth of investment in the U.S. economy by American firms for the same time period. Further, since 1950, FDI has become the primary form of international business activity for many U. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

The Trojan Horses: Japanese and U.S. Presence in Europe
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.