12

Why do traders invest in manufacturing?

Jean-François Hennart and Georgine M. Kryda

Why do traders invest in manufacturing? In this chapter we argue that the manufacturing investments of traders result from their efforts to secure the custom of manufacturers. As markets mature and information diffuses, trading companies risk being bypassed by their customers. One defence is to take an equity stake in them to guarantee their trading rights. Because the goal of these investments is to tie customers, not to exploit advantages, such stakes are likely to be minority ones.

A second defence for trading companies faced with the decreasing value of their contribution as industries mature is to orchestrate the development of new value chains whose trade they will handle. The superior intelligence of trading companies gives them a comparative advantage in this task. Their broader viewpoint and their ability to structure the whole chain reduce the risk they face in financing new businesses. Setting up the chain will lead them to invest strategically in selected stages of the chain. All of these investments will serve to support trading.

As markets in these value chains mature, trading companies will sell their minority stakes to their manufacturing partners, either because they are in danger of losing the trade of their affiliates, or because they can cash in on their investment while still safeguarding their trading rights. The resulting pattern of trading company investments in manufacturing should be one of short-lived minority investments that are eventually sold back to their majority joint venture partners.

This chapter checks this story against the pattern of stakes taken by Japanese trading companies in all manufacturing affiliates that were active in the United States in 1980. We find that, compared to the stakes taken by non-trading Japanese investors, trading companies had a preference for minority stakes. The manufacturing stakes of Japanese trading companies were also shorter lived and more likely to be sold to their majority partners than was the case for non-trading investors.

We start this chapter by considering the fundamental logic of trading companies, and how this logic leads them to invest in manufacturing. The second section describes the investments made by 1980 by Japanese trading companies in US manufacturing subsidiaries and finds support for our

-213-

Notes for this page

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 book

This book 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 book

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

Cited page

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

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 page

Bookmark this page
The Multinational Traders
Table of contents

Table of contents

Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this book

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?

Help
Full screen
/ 236

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access 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

    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.

    Buy instant access to save your work.

    Already a member? Log in now.

    Author Advanced search

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.