Patterns in the Expansion of U.S. Banks' Foreign Operations
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the
in
Banks'
Expansion Foreign
of
U.S.
Operations StewartR. Miller* INDIANA UNIVERSITY
ArvindParkhe** INDIANA UNIVERSITY
Combining foreign direct investment theory with data on 32 countries from the Federal Reserve Board, we examined U.S. banks' patterns of foreign operations, including their levels of banking services and choice of organizational forms in host countries. Results generally supThe
servicesectorhas becomea cor-
nerstone of the U.S. economy. As a percentage of U.S. GDP, services have risen from 46 percent in 1980 to 54 percent in 1995. Further,service industries constitute a growing percentage of U.S. direct investment abroad, from 28 percent in 1980 to 48 percent in 1995. The globalization trend is particularlystrong in banking, where technology, liberalization of trade policies, privatization of
ported predictions, but only in developed countries. The lack of support in rapidly growing markets of Asia and Latin America raises serious theoretical concerns, and presents fresh research opportunities into the global banking industry. banks in emergingcountries, and globalization of non-financial markets have mergedin recent years to createunprecedented opportunitiesand challenges. Yet, extant literaturefocuses primarily on industrial multinational enterprises (MNEs),not service MNEs. Within the latter, empirical literature (e.g., Ball and Tschoegl, 1982; Contractorand Kundu, 1996; Erramilliand Rao, 1990; Goldberg and Johnson, 1990; Goldberg and
R. Miller is a doctoral student in the Department of Management, Kelley School of Business, Indiana University (Bloomington). His research focuses on the global strategies of companies in service industries (especially, financial services), and on international competitiveness.
*Stewart
**
Arvind Parkhe is an Associate Professor in the Department of Management, Kelley School of Business, Indiana University (Bloomington). His research focuses on the formation, structuring, and management of strategic alliances, and on the global strategies of companies in service industries.
An early version of this article was awarded the distinguished paper award at the 1998 Midwest Academy of International Business. We wish to acknowledge valuable input from anonymous reviewers of JIBS and from John Daniels, Gary Insch, Sumit Kundu, and Richard Rosen. We benefited from discussions with analysts at the Office of the Comptroller of the Currency and the Federal Reserve Board. Research funding from the Kelley School of Business is greatly appreciated. JOURNAL OF INTERNATIONALBUSINESS STUDIES, 29, 2 (SECOND QUARTER 1998): 359-390
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U.S. BANKS'
FOREIGN OPERATIONS
Saunders, 1980; Sabi, 1988) lags far behind theoretical literature(e.g., Aliber, 1984; Boddewyn, et al., 1986; Grayand Gray, 1981; Grubel, 1977; Lovelock and Yip, 1996; Yannopoulos, 1983). We con-
tend that this lag stems in part from severe co
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