Foreign Direct Investment by Smaller UK Firms: The Success and Failure of First-Time Investors Abroad

276 Pages·1988·19.47 MB·English

by  Peter J. Buckley

FOREIGN DIRECT INVESTMENT BY SMALLER UK
FIRMS
Also by Peter]. Buckley
EUROPEAN DIRECT INVESTMENT IN THE USA
BEFORE WORLD WAR I (with Brian R. Roberts)
HANDBOOK OF INTERNATIONAL TRADE
(editor, with Michael Z. Brooke)
THE FUTURE OF THE MULTINATIONAL
ENTERPRISE (with Mark Casson)
THE INDUSTRIAL RELATIONS PRACTICES OF
FOREIGN-OWNED FIRMS IN BRITISH
MANUFACTURING INDUSTRY (with Peter Enderwick)
THE ECONOMIC ANALYSIS OF THE MULTINATIONAL
ENTERPRISE (with Mark Casson)
Also by Gerald D. Newbould
SUCCESSFUL BUSINESS POLICIES
(with G. A. Luffman)
THE RECEDING IDEAL (with A.S. Jackson)
BUSINESS FINANCE
MANAGEMENT AND MERGER ACTIVITY
EQUITY ISSUES AND THE LONDON CAPITAL
MARKET (with AJ. Merret and M. Howe)
Also by Peter]. Buckley and Gerald D. Newbould
DIRECT INVESTMENT IN THE UNITED KINGDOM
BY SMALLER EUROPEAN FIRMS (with Zdenka Berkova)
FOREIGN DIRECT INVESTMENT
BY SMALLER UK FIRMS: THE
SUCCESS AND FAILURE OF
FIRST-TIME INVESTORS
ABROAD
Peter J. Buckley
Professor of Managerial Economics
University of Bradford
Gerald D. Newbould
Chairman, Department of Finance
Cleveland State University
and
Jane C. Thurwell
formerly Consumer Marketing and Planning Research
Philips International
M
MACMILLAN
PRESS
© Peter J. Buckley, Gerald D. Newbould and
Jane Thurwell 1978, 1988
Softcover reprint of the hardcover 2nd edition 1988 978-0-333-39818-0
All rights reserved. No reproduction, copy or transmission
of this publication may be made without written permission.
No paragraph of this publication may be reproduced, copied
or transmitted save with written permission or in accordance
with the provisions of the Copyright Act 1956 (as amended).
Any person who does any unauthorised act in relation to
this publication may be liable to criminal prosecution and
civil claims for damages.
First published under the title Going International:
The Experience of Smaller Companies Overseas,
by Gerald D. Newbould,
Peter J. Buckley and Jane C. Thurwell
by Associated Business Press,
London, in 1978, and by
Wiley, New York, in 1979
Second edition (Macmillan) 1988
Published by
THE MACMILLAN PRESS LTD
Houndmills, Basingstoke, Hampshire RG21 2XS
and London
Companies and representatives
throughout the world
British Library Cataloguing in Publication Data
Buckley, Peter J.
Foreign direct investment by smaller UK
firms: the success and failure of first
tirrie investors abroad.-2nd ed.
1. Small business-Great Britain-
Management 2. Subsidiary corporations-
Management
I. Title II. Buckley, Peter J.
III. Thurwell, Jane C. IV. Newbould,
Gerald D. Going international
658'.049 HD62.7
ISBN 978-1-349-08233-9 ISBN 978-1-349-08231-5 (eBook)
DOI 10.1007/978-1-349-08231-5
Contents
Acknowledgements Vll
Introduction: Foreign direct investment IX
by smaller UK firms
1 Going international 1
2 The firms in the sample 6
3 The success of overseas production subsidiaries 15
4 The preliminary stages 43
5 The planning stages 69
6 The investing stages 98
7 Controlling the subsidiary 126
8 Lessons and problems 152
9 Overseas sales subsidiaries 179
10 Profile of a successful production subsidiary 199
A ppendz"ces
I Regulations, policies and inducements, by
country 202
II UK exchange control policy 229
III Questionnaire 232
Index 241
Acknowledgements
The research was carried out while the three authors were at
the University of Bradford Management Centre and
acknowledgement is due to colleagues there whose abilities
fostered the environment conducive to research.
In terms of direct help we are indebted to those senior
managers who spent time with us providing the material for
this report and in commenting upon the first draft:
M. A. Alexander G. A.Jowitt
F. D. Biddle W. H. Liversidge
J. Casling L. 0. Luff
P. S. Caton D. R. Marshall
W. R. Cheston G. L. Myles
A. Connor Wilson R. Noskwith
B. Crossley W. Reik
F. T. Davies M. K. Rose
B. B. Dearden S.M. Selka
P.Down N. Styles
E. P. Foden J. M. Tildesley
N. Fountain B. A. Wallace
S.Fox D. Westermann
J. P. Hawksfield D. Westwood
F. Hicks P. D. Wheatley
D. R. Hope P. E.J. White
H. H. Jackson R.I. Woods
A.Jannece
vm Foreign Direct Investment by Smaller UK Firms
Equal acknowledgement is made to those senior managers who
prefer to remain anonymous.
Further helpful comments on the first draft were provided
by Bernard Wolf and the numerous drafts were processed with
unfailing spirit by Sylvia Ashdown, Debbie Zahar, and
Caroline Newbould. Our thanks to these people for their help.
Primary financial support was provided by the Foundation
for Management Education, and the Houblon·Norman Fund
at the Bank of England provided for the travelling expenses.
Without the support of these two bodies, the research could
not have taken place, and thus the acknowledgement is a
grateful one.
Finally the usual rider is in place: help was essential from all
the above but, in the end, what appears is solely the
responsibility of the authors.
Cleveland and Bradford
Introduction: Foreign direct
investment by smaller UK
firms*
Foreign direct investment by small firms has been a neglected
area in international business research. Part of the expla
nation has been the strong positive relationship between size
of firm and foreign direct investment. Foreign direct invest
ments are dominated by a small number of large firms as we
shall see in Section IV. However, this has meant that the
special issues arising from foreign direct investment by
smaller firms have been neglected. Section II analyses the
literature on smaller-firm foreign investment and Section III
attempts to draw out the crucial inferences arising from the
study of the foreign expansion of smaller firms.
*I would like to thank Hafiz Mirza, Nicholas Wilson and Professor Mark Casson for
helpful comments on an earlier draft.
I Definitional Problems
It is apparent that definitions of 'small firm' vary according to
author and context. Definitions are not right or wrong, just
more or less useful. Table I shows the definitions employed by
the Wilson Committee and the UK 1981 Companies Act. By
these definitions, the companies in our study (worldwide
turnover less than £10 million) are relatively large. However,
when we examine the criteria used for instance in the Bolton
Table 1 Definitions of small firms
A. Wilson Committee 1978 (cmnd. 7503)
Manufacturing 200 employees or less
Retailing Turnover £185 000 p.a. or less
Wholesale trades Turnover £730 000 p.a. or less
Construction 25 employees or less
Mining & quarrying 25 employees or less
Motor trades Turnover £365 000 p.a. or less
Misc. services Turnover £185 000 p.a. or less
Road transport 5 vehicles or less
Catering All excluding multiples and
brewery-managed public houses
B. 1981 Companies Act
I. Medium-sized
A company may be classified as medium-sized if, for the
financial year and the one immediately preceding it, two
out of the following three conditions apply:
(i) turnover did not exceed £5. 75m
(ii) balance sheet total did not exceed £2.8m
(iii) average weekly number of employees did not exceed
250