Direct Foreign Investment: Costs and Benefits

By Richard D. Robinson | Go to book overview

Chapter Ten
Overview of Corporate Reactions

Richard D. Robinson

Two years ago, my associates and I conducted research in the United States to ascertain management response to the opportunities and problems created by government intervention in the international marketplace through the introduction of incentives and disincentives. 1 The focus was primarily on developing countries, but not exclusively. It was felt that one had to view management reaction in the context of the world economy, for many industrialized countries compete vigorously to attract foreign capital, management, and technology.

The central question asked was: Did executives believe that what governments were doing influenced their decisions as to the direction and nature of corporate involvement in foreign markets?

In the process of the research, we interviewed at some length executives in 51 corporations in 12 industries (plus 5 conglomerates that were unclassifiable), ranging in size from $50 million to over $10 billion in annual sales and in employment from 4,300 to over 600,000. The degree to which these firms were active overseas varied enormously, from 5.6 percent of total sales to 60.5 percent, and from 6.1 to 70.6 percent of total assets. Five claimed that over half of their total assets were located outside the United States; 15, over 35 percent. Twenty-three firms report 20 or more foreign affiliates, and 20 reported affiliates in more than 15 countries. Others had no or very few offshore affiliates. Organizational form varied from the mere exporters to the true multinationals. Of the 51 corporations, only 10 alleged a preference for 100 percent ownership of any overseas venture, while 13 indicated a preference for joint ventures, 1 opted for technology transfer contracts only, and 25 reported a flexible policy in this regard. Experience in international business ranged from a century or more to five years or less.

I cite this detail simply to convey the notion that it was unlikely that the responses we received were heavily biased by industry, firm size, degree of overseas commitment, control and ownership strategy, and length of experience in overseas markets.

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