European Practices and Policies
John M. Stopford
Any discussion of European experience with international investment must start from the perspective of European attitudes and policies toward big business in general and foreign firms in particular. Government policies have in the main reflected concerns about scale, concentration, efficiency, and national protectionism. Very little explicit policy has been developed in respect to ownership as a separate instrument for achieving national ends. Rather, joint ventures have been used as but one of the many means of achieving commercial objectives. A few numbers make the point. Of all the foreign investments in the United Kingdom at the end of 1981, over 80 percent were wholly owned by the foreign parent, and less than 10 percent were in the form of minority (i.e., less than 50 percent) equity holdings. In France, over 90 percent were majority-controlled by the foreign parent in the mid-1970s. Similar figures are believed to hold true for other European countries.
This chapter reviews the main lines of development of policy and practice toward inward foreign direct investment in the major European countries over the past forty years. The focus is primarily on the experience of France, West Germany, and the United Kingdom, for which most of the available data pertain. Some reference is made to developments in other European countries and to European Economic Community (EEC) policy where it affects the behavior of firms and their choice of ownership policy.
Over this long period of postwar recovery and sustained growth, followed by the current conditions of faltering adjustments to the two oil shocks of the 1970s, the role of foreign investment has continued on a path of steadily increasing importance. By the mid-1970s, the latest period for which reasonably reliable statistics are available, foreign investments had risen to command the shares of European manufacturing industries shown in Table 4.1. In very general terms, their shares of industry, as measured by production, value-added, and capital investment, were higher than their shares of employment. Their shares of particular industries varied widely, as Table 4.2 shows. They tended to have above-average shares of advanced industries, notably electronics and pharmaceuticals, and below-average