I, as a managing-director of manufacturing Multinational Corporation in Japan which produces electrical and electronic equipments, commissioned the research department to analyse the trends and impacts of globalization as well as MNCs activity in UK with the purpose of studying the Company’s potential investment in UK. To clearer understanding the roles and effects of FDI, the research department analyses data based on Measuring Globalization: The Role of Multinationals in OECD Economies comprising number of firms, number of employees, compensations, R;D expenditure and gross output by the country of origin.
This paper also reports the cultural effects and the Company’s potential challenges when shift to UK together with recommendation on investment decision. Japanese firms were encouraged to offshore to oversea because of abundance of resource, accessibility of domestic entrepreneurs together with socio-economic constancy and the local capitalist sector’s condition of the host economy until the early 1980s. After the mid-1980s, the low labor cost also became one of the key factors to attract Japanese corporations.
At the same time, a lot of Japanese investors shifted into sophisticated technology manufacturing industries which helped the Japanese Companies keep their competitiveness among the other countries and also changed the structure of the Japanese economy. Japanese multinational firms have dominant share in several countries such as mostly Europe and North America, The NIE and the ASEAN (Ratnayake and Edirisuriya, 2008).
The following analysis of MNEs activities in UK including number of MNEs companies, number of employee, wages and salaries, R;D expenditure and gross output will help the Company to consider whether should invest in the United Kingdom. First, we consider the number of multinational firm in UK during 1995-1996. According to the trend of globalization growing, the total amount of MNEs in UK went up almost 290 firms or about 12% in 1996.
The trend of MNEs number enlarged in many countries especially the United States and the European Union which significantly grew approximately 22% and 31%, respectively. The rest of countries, except Canada and Sweden, were a small amount higher than previous year. For Canada and Sweden, the figure of affiliates declined in particularly Canada which dramatically dropped off by 38 companies or around 32% in 1996. When consider in term of proportion, the country which have the most multinational corporations in UK in 1995 and 1996 is the United States with 36.
4% and 39. 7% of total OECD. The second is the European Union which takes the share around 33% in 1995 and 39% in 1996. The share of companies under foreign control was weakest in Italy, Belgium and Asia (Non-OECD). Although the number of Japanese firms in UK considerably enhanced from only 34 in 1983 to 247 by the end of 1997 (Westney, 2001), the penetration of Japanese affiliates in UK was quite weak as the proportion of Japan affiliates in UK was rather low in 1995-1996.
Nevertheless, the primary destination for Japanese direct investment was North America followed by Asia and Europe throughout 1980s and 1990s (Westney, 2001). Based on data of OECD (2002), England was one of the most attractive countries for the high- and medium-high-technology industry in 1998. This is considered as a good benefit for the Company, which is also classified in the high-and medium-high-technology industry, to invest in UK. The empirical evidence show that a sharply rise in foreign companies closely relates to a high number of employment opportunities.
During 1980-2004, local employment in BOI enterprises grew up from 10,538 to 437,698 which around 87% of its increasing created by MNEs and more than 95% of the employment opportunity growing were in the manufacturing segment (Ratnayake and Edirisuriya, 2008, cited in Athukorala, 2002, BOI, 2005). The total figures of employee and foreign firms in UK in 1996 were larger than the previous year as the same pattern. As it should be, the employee amounts of foreign firms noticeably moved up in all countries except Canada and Sweden.
Nonetheless, a number of staffs Australia and New Zealand obviously reduced almost 22% or around 3,400 positions in 1996 in despite of Australia and New Zealand enterprises in UK enlarged at that time. Since FDI of some countries highlighted on capital rather than labor intensive so it might be explained this noticeably differences of employment. Besides, a progress of worker numbers in all countries was not only from new post creations via greenfields but also from job transferrals by a change of ownership in term of acquisition.
As a result, it could be said that US generated nearly 380,000 positions in total consisting of new job creation as well as post transferrals prior to the European Unions which increased a number of employments higher than 59,000 posts in 1996. The United States still had the highest proportion of employment held by MNEs which over 45% in 1995 and 1996 while Italy, Belgium and Asia (non-OECD) held the least percentages. Worker amounts of Japanese multinational firms were greater than earlier year over 5,000 jobs as same as France.