Performance of U.S. Operations in Britain
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The value of U.S. overseas investments has grown rapidly in recent years. From $10.7 billion in 1949, the worldwide total of U.S. direct investments had grown to $70.8 billion by 1969. Sales from overseas operations had risen correspondingly. In 1967 they totalled approximately $80 billion, amounting to 2.6 times the value of U.S. merchandise exports. Great Britain is one of the major areas of U.S. investment. The relative importance of this area to American firms investing abroad is growing. In 1969 U.S. direct investments in the U. K. totalled $7.2 billion and had grown 188 percent in a decade. The U.K.'s share of worldwide direct U.S. investments increased from 8.3 percent to 10.1 percent during the same period. This study focuses on U.S. investment in Britain. Specifically it studies the performance record of those investments. Our concern centers on such things as profits, costs, efficiency, export behavior and the record of U.S. firms in research development. Productivity of U.S. Operations Evidence points to U.S. firms in Britain having higher labor productivity than their British competitors. The percentage of total sales of British manufactured goods produced by American firms in Great Britain exceeds the percentage of employees working for the American companies in the same industries. To be more explicit: in 1963 the average sales per employee for British manufacturing companies was
1. Readerswho are interestedin a longer version of this article,including additional tabular data and an appendix explaining the calculations used to derive Table 1, may write the author at Eppley Center, Michigan State University, East Lansing, Michigan, 48823 for a copy.
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? 3358; for American companies in Britain the figure was ? 4088. In the case of all but one of the 11 major industry groupings analyzed by the author, sales per employee for the American companies in the industries were greater than they were for the British firms. Factors other than varying productivity can account for this phenomenon. Still, the presumption is strong that underlying the differences are, in fact, differences in productivity. Since productivity is an important performance criterion we need to study it in more detail. Few careful comparative productivity studies exist. One study compares two chemical industry giants, one British, the other American. Imperial Chemical Industries, Ltd., the dominant firm in British chemicals, is similar in size and product mix to Union Carbide, second largest chemical company in the United States. I.C.I. made a detailed comparison of its costs with Union Carbide's to learn why its output per man was only one-half of its American counterpart. Sixty percent of the productivity difference resulted from: a) larger U.S. plants which permitted scale economies, b) larger customers in the U.S. which lowered the cost of billing, order handling, selling, et
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