Recent Foreign Direct Manufacturing Investment in the United States
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The study of direct investment movements has become increasingly important in recent years due to the impact that these movements have on development, balance of payments, and domestic control of the domestic economy. From 1954 through 1967, the value of foreign direct investment in the United States grew from $4.6 billion to $9.9 billion. Concomitant with this growth has been an increase in interest in the United States to attract foreign investment. At the national level the interest has evolved because of balance of payments problems; whereas, at the state and local level, interest is due to industrial development objectives. The purposes of this study were to explain why investment has entered the United States (a net direct investment exporting country) and to profile the investor and his decision process. Most of the information was gathered in interviews with corporate managers of 40 firms (located in Canada, France, Germany, the Netherlands, and the United Kingdom). All of these companies made their first direct manufacturing investments in the United States between 1954 and 1968. The study also relied on published material and interviews with bank and government officials in the United States and abroad. Investor Description First of all, what did these companies look like? On the question of nationality, direct investment in the United States has come almost entirely from ten highly developed countries and nearly 60 per cent from Canada and the United Kingdom. This is understandable since firms from these countries are more apt to have available capital and 125
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management to divert to external endeavors. Furthermore, these firms have experience in producing and selling goods in the economies which most closely resemble the economy of the United States. Since at the time of the study there were only 316 foreign firms which were known to have manufacturing investments in the U.S., it was believed that these would be very large firms relative to other foreign firms. This was not true however. The participants' sales ranged from $1.0 million to $1.8 billion in 1967. Five had sales of over $500 million and six had sales of less than $10 million. Most of the companies were, nevertheless, large relative to other firms in their product lines. Because of the size and scope of the American market, foreign industries have invested in a wide variety of American production. The 40 firms surveyed have investments in 19 of the 21 two digit SIC categories. There has been some recent concentration, however, in mineral processing, pulp and paper, and electronics. American production was usually in the same product line in which the investors had experience elsewhere. Some of the exceptions are noteworthy. One firm went from salt to machine tools, one from beer and cement to electronics, and one from steel pipes to gasoline pumps. Another had no production prior to
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