US BUSINESS IN EUROPE: AN AMERICAN PERSPECTIVE

 Time-frame: Late 19th century to early 20th century

 Geographical span: From Britain to Russia, as host countries.
 We are going to take into consideration US manufacturing firms, which not only manufacture,
but also market their product in Europe.
 Many authors contributed (all individuals living in Europe)(anche quel mascalzone di Colli),
and here there are extracts of their reflection on FDI of investors that are not only the US.
 In general, we see cross investments: US direct investments within European countries
coincided with European direct investments abroad (and specifically in the United States).
 US business had immense impact on the “Old World” (Europe), however, the majority of
Americans’ ancestors emigrated from Europe.
 We must say that America transformed its immigrants and assimilated them (spreading them
across the whole country), and that applies for all immigrants (European, African, Latin
American, Asia); the nation developed its own characteristics nourished by diversity. New York
remained very international, however over many decades (especially after WWI) the rest of the
country became “insular” (lower movement of people with Europe because of immigration
restrictions).
 Mira Wilkins tends to equate American business in Europe with US direct investments in
Europe, but she also says that the influence of the US businesses can be seen also through trade,
technical assistance or patent licensing arrangements.  while she will focus in the paper on the
behavior of multinational enterprises in making FDI in Europe and influencing the process of
“Americanization”, she does recognize the fact that US business can have influence in ways
other than through direct investments.

1. The Time Dimension

 It is important to divide the impact and experiences of US Business in Europe into periods based
on the changing position of the US.
 Before mid-19th century: US business in Europe was very small  American individuals
abroad, but not American businesses abroad.
 From the mid-19th century to WWI: great growth of US business in Europe based on advanced
technology (ex. Ford opens manufacturing facilities in the UK)
 Europeans seemed to see Americans as innovative, dynamic, but also naïve and young if
compared to the more experienced residents of the Old World (Europe).
 America: a context of geographically extended market with no tariff barriers between states 
mass production and large throughputs. Many firms became national in the domestic market and
then international almost at once.
 US direct investments in Europe in 1914 constituted 21.6% of US direct investments abroad.
 From 1918 to 1945: much of the Old World lay in ruins after war, and the US surfaced as a
creditor nation, undamaged and strengthen. Europe was dependent on the US, and Us had
accumulated incredible technological progress and far in advance than Europe. Per capita GDP
was much higher and Us was already a consumer society.
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 Then came the ’29 crisis and fascism in Germany and Italy  the plans of “Americanization of
Europe” collapsed.
 During WW2: allies depended on the US for goods and monies for their victory. Plus,
American soldiers fought in Europe becoming familiar. US direct investments in Europe in
1929, 1936 and 1940 were 17.8%, 18.6% and 20.3% of total US direct investments abroad.
 From 1945 to 1970s: US influence throughout Western Europe. The influence was
unprecedented: living standards in the US and Western Europe have converged since the late
‘70s, yet they were noticeably different in the immediate post war years. In the post war years,
“American technology, ideas and mentality grew in Europe exponentially”. The American
industry was praised for its productivity and efficiency. Moreover, as the European Economic
Community took shape, many US businesses perceived a huge market opportunity.
 Development of synthetic textiles and pharma in the US, which invested in Europe.
 Antitrust authorities in the US (which were born in the late 1930s and interrupted during war
years) shaped US business abroad, sometimes encouraging and others discouraging them.
 In the 1960s Us business in Europe enlarged its reach. Computers came of age and IMB was
leading the world into the new era. IBM had long been operating in Europe in calculating
machines and it was easy to transform these into a new emergent industry. America of the 1950s
was the world of the organization man, with American management methods becoming
influential and transformed European businesses. Sometimes, there were sporadic rejections of
what America brought to Europe (US perceived as too materialistic or concerned with money).
US managers preferred to stay in the US rather than following a career path in Europe; this
changed in the 1960s, because of the jet airplane  price of travel dropped.
 American multinationals welcomed the Treaty of Rome and the possibility of an integrated
Europe  the US presence became increasingly visible. By 1970, 31.4% of US direct
investments abroad was in Europe.
 Mid-1970s to present: by 1980s television was available and information were abundant.
 Even during the 70s crisis (stagflation = stagnation + inflation) the role of US within Europe
remained important.
 1980s: Japanese direct investments rose and seemed to outpace the older US FDI in Europe 
US was once again a debtor nation in world accounts (just like it had been before the WWI).
American manufacturers were eclipsed and were no longer competitive  “Japan as Number
One”. During all these years, however, US outward direct investments in Europe continued to
mount but in the 1908s and early 1990s the growth was much more modest than in prior years. 
many people considered American management no longer adequate to face globalization and
Japanese methods became more influential.
 Then, in the 1990s, US companies restructured  new technologies transformed the economy,
whereas Japanese growth slowed down with many problems surfacing  evident that Japan
would not be number one in the world economy. Moreover, the Soviet economy had disintegrated
leaving just one super power: the United States.
 21th century: added US direct investments in Europe (as well as Europeans in the US). Moreover,
the EEC had become the European Union which by 2007 had 27 participating countries. 
Business opportunities grew and also new opportunities in Eastern Europe aroused. The
introduction of the euro lowered the costs of doing business in the EU. Rising family income in
Europe = new demand for American-type products. By 2005, 51.2% of all US direct investments
abroad were in Europe  not only higher than 1970, but grown dramatically also in absolute

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 terms from $31.32* billion in 1970 to $1,059.4 billion in 2005(*31.32  =$160 billion
correcting this value in 2005 to account for inflation).

2. US Business Offerings in Europe

 The offerings of US business in the EU varied over time, but authors agree that they were
modern, qualitative and innovative, in particular before WWII, for Western Europe after the
war, and for Europe as a whole after the collapse of the Soviet Union.
 US companies were focusing on the manufacturing sector, but also on advertising for major
brands (McDonald’s, Gap, Hilton Hotels, etc.). Most of the services advertising dates back to
the period after WWII, whereas the low-priced consumer goods were advertised in pre-WWI
days, during 50s and 60s and during the 70s.
 American direct investments in Europe were directed to the secondary and tertiary sectors. They
were tailored to the needs of individual countries and after WWII to the needs of regions within
the European Community.
 After WWII US companies invested in oil and gas in the North Sea. During the interwar years,
there were few investments in the production of oil but several in refining and marketing.
Investments in these two activities continued also after the wars. The reason was that the
automobiles industry was growing and hence demand for oil increasing. Also branded food
companies sized the opportunity of growing income levels of European consumers. Rising
incomes also made automobiles affordable. US advertising companies expanded, and US
companies established R&D facilities.
 Before WWI, other major sectors in which US companies invested was the life insurance
business and banking. During the interwar years, the nature of investments changed:
Manufacturing and partial-processing activities expanded. For example, Ford and GM
established in Europe, IBM, Telephone & Telegraph. The activities Americans brought were
highly technological.
 WWII implied a disruption of business activities, including those of US companies. New
managerial methods were introduced, and European companies turned to American consultants
for advice. McKinsey became relevant in this context. The new methods did not concern plant
management, as in the pre-WWI years, but rather company management. The process of
transferring company management accelerated during the 70s and 80s, given that US firms
began to adopt Japanese processes. The demand for US services increased, for example IBM
started to sell services on a global basis.
 In recent years, companies in professional, information and financial services, in retailing and
wholesaling have increased their significance.

3. Variations by individual European host countries

 Depending on the country, US firms had different activities throughout Europe. At the same
time, also performance experience varied, and the same is true for the size of US direct
investments and their composition. Because of historical, cultural and linguistic features the UK
was the leading host country from 19 – 21st century. Indeed, the liability of foreignness for US
companies was lower in the UK.
 According to a ranking of host countries for US multinationals (published in 2005), the news are

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 - Switzerland is the most prominent destination
- Rising importance of the Netherlands
- Fifth place of Luxembourg
- Top-6 position of Ireland
 The number of holding companies in European countries increased rapidly. On average, the %
of US direct investment in manufacturing was 22%, but with large differences across countries
(Italy 60.1% vs Sweden 7.8%). Reasons for the large differences: Size of the market, openness
of the economy, membership of the European Union, national resources (natural and human),
legal requirements.
 The performance of US businesses over the years was not consistent. If profits were low, it was
unlikely that companies would decide to expand their investments. Also, in some countries such
as Germany and France, the climate was less welcoming toward US companies.
 As US companies invested in the EU, they also set up regional head offices. They spread multi-
unit and -functional activities throughout European countries.
 Bonin argues that only from the 1980s US companies adopted unified marketing strategies in
Europe.
 In recent years, the standard of living within the EU has increased and the American model has
influenced these improvements. One reason could be that they had higher productivity levels
and offered better wages (Rozalén).

4. Issues about the adaptability

 In considering the US business in EU, there were various degree of adaptation and application.
 US transferred abroad what they developed at home; nonetheless, adaptions were always
required. Sometimes US companies adapted only after they encountered European competition
that used modified American methods.
 Adaptation was segmented (i.e. in every field, step of the production process…)
 When American companies expanded through acquisition, the adaption was faster.
 Many of the earliest adaptation of US companies were in HR management (e.g. Ford expansion
in EU).
 In studying US investments in particular EU countries, it is essential to look at legal structures
(ownership), managerial structures (who reports to whom) and the various operational structures
(capital, technology, personnel…).
 Over the yeas US companies entered and exited the EU mkt, because of absence of success,
changes in corporate priorities, restructuring, as a result of governments actions (e.g. Russia,
Spain - Franco).
 Also European companies invested in the US (e.g. cross investments between US and UK in the
pharmaceutical sector).
 American multinational have found favor and disfavor; however, they were usually welcomed
for the employment they brought (together with new technologies and organizational
innovations).
 But there has often been desire of more transparency from US MNEs, and attitudes and
regulations in EU changed often.
 American businesses often perceived as materialistic, embodying capitalism, especially in the
20th century, by socialist but also from the Right, also fearing a denial of national sovereignity.

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 Overall, the reactions to the various waves of the American “invasion” have not been consistent:
+, -, tempered.

5. Are outward FDIs a sign of strength? And inward FDIs a sign of weakness?

 By looking at the data about the foreign direct investments of US towards Europe and vice
versa, it is possible to notice that these are very similar, revealing the cross investments between
them.

 According to Muller, US companies that invested abroad were motivated by an advantage and
this is implicit, since the successful company abroad has overcome the liability of foreignness.
Muller also wander whether this is revealing a weakness of the host economy (that allowed the
foreign company to succeed, as in 1988 in UK).

 And also the author agrees that most of the times that there are investment in the US, for
example, these are motivated by strength of the American market itself, that can offer more
opportunities. This concept is valid for every kind of capital flows (flowing towards better
opportunities); the concept of the advantages that companies can have is something properly
related to the foreign direct investments.

 In conclusion, according to the author the reasons to invest abroad are connected both to the
capabilities of the company, since it must have some kind of advantage to survive in a foreign
market. But, since it concerns a choice between investing in the home country or in the host
country, the foreign location must offer some advantage greater than the home location.