Richard Palmer Department of Economic History Stockholm University Universitetsvägen 10A, plan 9 SE-106 91 Stockholm, Sweden e-mail:
[email protected]
__________________________________________________________________________________________
Long-term globalization trajectories of Swedish and Dutch multinational corporations: a quantitative assessment
This paper compares changes in the geographical distribution of foreign activity of long-standing, large Dutch and Swedish manufacturing firms during the 1950-2003 period. The overarching question I pose here is whether, in a historical perspective, globalization and regionalization should be seen as complementary or opposing trends in the cases of Dutch and Swedish industry. My analysis specifically focuses on changes in the relative distribution between activity in the home countries of the firms and their foreign activity pertaining to the rest of Europe on the one hand, and to the rest of the world on the other hand. I rely mainly upon data on the relative size of foreign sales and employment and occasionally I also report on changes in the regional distribution of foreign subsidiaries of these companies. Thus, I outline the long-term trajectories of overseas expansion by Dutch firms AKU/AKZO, DSM and Philips and the Swedish firm Volvo, supplemented by data on the foreign activity of a few other Swedish MNCs. I conclude that, firstly, corporate globalization should be seen as a gradual and long-term process, and that business activity by the MNCs examined here has in relative terms mainly expanded outside Europe. The MNCs have gradually gravitated away from their home countries (with a few exceptions) and away from the home region.
Richard Palmer _____________________________________________________________________________________
2 Paper to be presented at the Conference on Internationalization of Dutch Business in the 20th century at Utrecht University, 19-20 November 2004.
Introduction The objective of this paper is to trace changes in the geographical distribution of business activity of a few of the largest MNCs from the Netherlands and Sweden during the 1950-2000 period, paying particular attention to the distribution between Europe and the rest of the world. It forms part of a continuing project of mapping the historical globalization trajectories of Dutch and Swedish large, long-standing multinational firms.1 My aim here is to add some new insight in this area and to contribute to clarifying whether globalization and regionalization should be seen as complementary or opposing, mutually enforcing or excluding trends in the cases of Dutch and Swedish industry. I specifically focus on constructing time series that uncover long-term changes in the foreign activity of large, long-standing firms from these two small, open and advanced countries. The companies I have chosen to examine are all significant and longstanding actors in the Dutch and Swedish economies: Dutch AKU, which after a merger in 1969 became Akzo and in the mid1990s formed part of Dutch-Swedish Akzo-Nobel, DSM chemical company and Philips electronics company. Swedish firms are represented by the Volvo motor company, one of the most important Swedish MNCs during the post-war period. I also briefly review data on the geographical distribution of foreign activity by Alfa Laval, Ericsson, Sandvik, SKF, Electrolux, Atlas Copco and AGA. These are all companies whose long-term globalization trajectories I have previously addressed.2 In order to place the activity of these Swedish and Dutch MNCs in a long-term, internationally comparative perspective, let us review some basic historical data illustrating the relative magnitude of international business activity by Sweden and the Netherlands. Smallness in terms of population and a limited size of the domestic market is commonly recognized as an important determinant of the extension of export markets.3 Hence, during the second half of the 20th century Sweden and the
I have presented an earlier version of this paper at the conference of the Swedish Network for European Studies in Economics and Business, in Mölle, Sweden, 25—28 May 2004. 2 Palmer (2001). 3 Cameron (1978), Katzenstein (1985), Rodrick (1997). 1
3 Table 1. Population, merchandise exports and stocks of outward foreign direct investment (FDI) in relation to totals for twelve West European countries for Sweden, the Netherlands and Switzerland, 1950, 1980 and 2000 (percentages). 1950
1980
2000
population
export
population
export
FDI
population
export
FDI
share
share
share
share
share
share
share
share
Sweden
2.73
7.27
2.72
3.99
1.54
2.74
3.48
7.70
Netherlands
3.94
5.67
4.65
10.97
18.13
4.92
9.31
10.15
6.67
12.94
7.37
14.96
19.67
7.66
12.79
17.85
totals
Note: Twelve West European countries = Austria, Belgium, Denmark, Finland, France, Germany, Italy, Netherlands, Norway, Sweden, Switzerland and United Kingdom Sources: Maddison (2001); UN Population Division; UNCTAD (2002); WTO (http://wto.org); UNSTATS on-line.
Netherlands have been intense per capita exporters in a global perspective. Moreover, the two countries have been significant foreign investors during the last decades of the 20th century, in both a global and European perspective. Their relative position as foreign investors, measured as their share in global FDI, has been even more pronounced than their share in merchandise trade.4 Table 1 compares Sweden and the Netherlands with twelve advanced European economies and demonstrates what exceptionally large exporters the small open economies have been on a per capita basis.5 During the post-war period the two countries accounted for no more than ca 7 percent of the total population of that group of countries, whereas they accounted for ca 13—15 percent of exports of that group (Table 1). Moreover, a remarkably large share of total outward investment by the group of 12 European countries fell to Sweden and the Netherlands (ca 20% in 1980 and 18% in 2000 as seen in Error! Reference source not found.). Likewise Swedish and Dutch companies are over4
In 1950 Sweden’s and the Netherlands’ population share in global total was 0.7% and their combined share in world
exports 4.1%. In 2000 their share in the world’s population was a mere 0.5%, whereas their combined share in total world exports was 4.7%. That year the two countries’ share in the world’s stock of foreign direct investment (FDI) was 7.1%. (Maddison (1995)(2001); UN (2002). 5
The twelve European countries are Austria, Belgium, Denmark, Finland, France, Germany, Italy, Netherlands, Norway,
Sweden, Switzerland and the United Kingdom.
4 represented amongst the world’s largest MNCs. Of the top 100 MNCs in 1990, five were Swedish, four Dutch.6 Ten years later both countries had three companies amongst the world’s largest MNCs.7 In work done elsewhere I have explored the globalization trajectories of large Swedish MNCs during the 20th century.8 In this paper I continue that work and present short case studies on the foreign activity of Dutch AKU/Akzo/Akzo-Nobel, DSM and Philips and Swedish Volvo. This paper assesses to what extent large and long-standing Dutch and Swedish multinational corporations located increasing shares of their business activity abroad during the second half of the 20th century. I specifically explore changes in the geographical distribution of these activities between the home country, the rest of Europe and the rest of the world. I am also interested in seeing whether there are any significant differences between these companies from the two countries. Seeing the companies are long-standing, large and important actors in their home-countries, their relative changes in their foreign business activities also mirror developments at aggregate industry level.
Selection of the MNCs The three Dutch corporations I shall examine were amongst the six or seven largest manufacturing corporations both in 1973 and 1990: AKU/AKZO, DSM, and Philips. Taken together, employment by these companies accounted for approximately 20% of total Dutch industrial employment in 1950, as much as 86% in 1973 and somewhat less, 68%, in 1993.9 For the time being I have chosen to omit the two largest companies, Unilever and Royal Dutch Shell, due to their complex organizational character which, in order to uncover their globalization trajectories, requires a different approach than the simple methodology I apply in this paper. I compare the post-war spread of international activity of the three Dutch groups with that of Volvo and a few other Swedish firms. Accordingly, in this paper I have settled for the following Dutch companies: AKU, which after a merger in 1969 became Akzo and in the mid-1990s formed part of Dutch-Swedish Akzo-Nobel. DSM coal and chemical company; and Philips electronics company, which in terms of annual turnover ranked second amongst Dutch companies in 1990 and
6
UNCTAD (2002) p. 93.
7
UNCTAD (2002).
8
Palmer (2001).
9
Calculated from Zanden, van (1998) p. 38.
5 1973, and third in 1950.10 That company became one of the world’s most transnationalized companies during the postwar period, ranking 10th in the world by the value of its production in 1973, and 24th by foreign sales in 1980. The Swedish companies which I have chosen to examine belonged to the largest and most significant corporations as regards to their role in the Swedish economy and in terms of the magnitude of their foreign activity. These companies belonged to the most significant Swedish manufacturing corporations throughout the post-war period. In 1980, for example, Volvo, Alfa Laval, Ericsson, Sandvik, SKF, Electrolux, Atlas Copco and AGA all belonged to the 10-12 largest Swedish companies in terms of their foreign sales and work-force.11
Principal questions The topics dealt with in the present paper belong within a wider framework of research issues that I have been working on during the last few years. I am specifically interested in the following questions: -
Did the relative business activity abroad and geographical spread attained by Dutch industry and its multinational corporations reach unprecedented levels during the last two decades, as they did for most Swedish companies?12
-
Does the term globalization in this context represent a, long-term historical trend or is it a contemporary development?
-
Are there other periods of rapid outward linking, apart from the current one, on the part of some of the most important MNCs of these two small open and developed countries?
-
Can one identify parallel developments as regards the spread across regions by large companies from these two open economies? If that is the case, it is close at hand to conclude that world economic forces have influenced the outcome more strongly than political decisions and domestic forces.
10
Bloemen, Kok, and Zanden, van (1993) p. 29.
11
Palmer (2001) p. 227.
12
In the case of Sweden, one remarkable exception from this general pattern is Ericsson, which in several respects had
reached the same level of relative magnitude of foreign sales prior to 1914 as it attained in the 1990s.
6
Method The method employed here is simple and mainly involves extracting and analyzing data on changes in foreign activity of firms during the last half century. I capture the process of corporate globalization of business activity along two main dimensions. Firstly, I measure the geographical spread of organizational linkages and the distribution of markets within the following basic categories: (i)
home country,
(ii)
home region(in this case Europe, excluding the home country) and
(iii)
the rest of the world.
In some instances, when I am unable to obtain figures for all three of these categories, I confine myself to the dichotomy home – foreign. The actual variables I present in this paper are mostly ‘foreign employment’ and ‘foreign sales’ – occasionally supplemented by information on the spread of foreign subsidiaries. One of the main questions asked here is whether large, long-standing Dutch and Swedish multinational corporations have become increasingly global or if on the contrary they have become ‘Europeanized’, that is, more oriented towards their home region. In order to examine this we shall have a closer look at the following main variables: home country employment, home country sales, employment in Europe (excluding the home country), sales in home country, sales to Europe (excluding the home country), employment in countries outside Europe, sales to countries outside Europe. When it comes to judging whether a company has been globalized or ‘Europeanized’ I give priority to comparing the various categories of employment, since they function well as proxies for the establishment of cross-border organizational linkages, and for the spread abroad of subsidiary networks, that is, of offices, sales outlets and production sites. By globalization of a firm I refer to a process whereby (i) increasing shares of sales and employment are located abroad and (ii) increasing shares of total sales and employment are located outside the home region, (that is, to non-European regions). Let us now turn to examining long-term changes in the foreign activity of the first case study – a company which experienced a number of significant organizational changes and eventually became a transnational Dutch-Swedish enterprise in chemicals and pharmaceutics.
7
AKU, AKZO and Akzo Nobel In 1929 Algemene Kunstzijde Unie (AKU) was formed by the merger of Vereinigte Glanzstoff Fabriken and Enka. Forty years after that AKZO was formed as a result of a merger by Koninklijke Zout Organon and AKU. Finally, in 1994, AKZO merged with Swedish Nobel and formed Akzo Nobel. We have to bear these structural changes in mind when looking at long-term variations in the regional spread of activity of this company. Let us begin by studying the long-term geographical spread of the Group in terms of foreign subsidiaries (the ‘extensity’ dimension). At the outset the AKU Group included subsidiaries in Germany, Austria, the Czech Republic, Great Britain, Italy, the United States and Japan.13 Although definite information on the size of foreign share-holdings is difficult to obtain, it seems clear that the spread of subsidiary networks of the AKU and subsequently the AKZO group was a slow, gradual process. As a matter of fact, not very much happened during the first three decades. Already in 1930 the company had established production sites outside the home country, in Europe, the United States and Japan. Between 1929 and 1960 the number of foreign countries covered by majority-owned subsidiary networks seems to have been approximately 7-9. In 1960 the company had established itself in Venezuela, and ten years later in Australia. Accordingly, it had almost obtained a global reach, Africa being the only continent to which its subsidiary network had not extended. In the following two decades not much happened to the spread of majority-owned subsidiaries. However, in 1990, for example, a large number of foreign holdings were between 40—50%. Naturally, after Akzo had merged with Swedish Nobel, the geographical scope of this new Group became considerably wider than that of its predecessors. At the beginning of the 21st century the Akzo Nobel Group extended its subsidiary network to countries such as China, Taiwan, Indonesia, Papua New Guinea and Chile. Another way of examining the process of globalization and the degree of “Europeanness” of a firm is to look at changes in the relative proportions of employment pertaining to the home country. A drawback from an economic-historical viewpoint when examining changes in business activity in Europe is that one can seldom obtain data for further back than the 1970s. For Akzo data on regional distribution of foreign sales are available from 1970 on. 13
AKU Annual Report 1929, p. 13. The actual relative size of these shareholdings is not reported in the Annual Report.
8
Figure 1. Geographical distribution of sales by AKU/AKZO 1965—1990, and by Akzo Nobel 1995—2003 (percentage shares) 100%
the Netherlands 80%
rest of the world 60%
Europe, excl. the Netherlands 40%
20%
0% 1965
1970
1975
1980
1985
1990
1995
2000
2003
Source: AKU/AKZO Annual Reports.
Figure 2. Geographical distribution of employment by AKZO 1970—1990 and by Akzo Nobel 1995—2003 (percentage shares) 100%
the Netherlands 80%
rest of the world 60%
Europe, excl. the Netherlands
40%
20%
0% 1970
1975
Source: AKZO Annual Reports. .
1980
1985
1990
1995
2000
2003
10 From Figure 1 we learn that, firstly, the share of the Netherlands in total sales by AKU, the subsequent AKZO Group and the successor of that company, Akzo Nobel, gradually decreased from the mid-1960s on. The proportion of total sales going to non-European markets increased gradually; AKU’s share in 1965 was 25%, whereas the non-European markets of Akzo Nobel amounted to 48% of the total. However, as non-European markets gradually gained in relative significance, not much happened to the share of total sales going to Europe outside the Netherlands. The proportion remained approximately between 50-55%. Figure 2 depicts long–term changes in the distribution of employment between the home country, the rest of Europe and the rest of the world. It shows that there is a corresponding pattern of decreasing significance of the home country in the long run; from 67% in 1970 to ca 80% three decades later (See also Table 2). Annual reports of the company do not supply any information on Europe’s part in total sales until the mid-1960s. The AKU Annual report for 1965 states that turnover in Western Europe was 75% of total turnover. For AKU’s successor Akzo and for Akzo Nobel, which in turn was the successor of the latter company, we have geographically specified data from 1970 on. As regards the relative share of foreign employment along the European dimension, the proportion of Europe (excluding the Netherlands) declined during the 1969-1990 period (Table 2). Although there are some variations between the figures given at five-year intervals, it seems clear that there was a diminishing trend in the share of Europe in total foreign employment. Table 2 summarizes changes in the geographical distribution of foreign business activity of the AKZO and Akzo Nobel groups. By combining the figures on foreign sales and employment we gain an over-all view of their globalization trajectory and of changes in the share of their foreign business activity pertaining to Europe. The ‘transnationalization index’ roughly indicates the extent of foreign activity in general, and the ‘Europeanization index’ reveals changes in the share falling to Europe. Accordingly, between 1970 and 1990 Akzo experienced a slight transnationalization from 76 to 80 points, at the same time as there was a decline in the significance of Europe, due especially to a decreasing share in foreign employment. In 1994, Akzo acquired the majority of shares in Swedish Nobel, and the Akzo Nobel group was formed. Not surprisingly, this new transnational corporation became even more transnationalized than its predecessors, reaching a level of foreign activity corresponding to that of the Swedish long-
11 Table 2. Foreign sales and foreign employment by AKZO 1970—1990 and Akzo Nobel 1995—2003 AKZO
Akzo Nobel
1970
1975
1980
1985
1990
1995
2000
2003
84 b
88
89
89
91
92
94
94
67
70
72
64
68
74
81
80
76
79
80
77
80
83
88
87
56 b
56
56
52
54
55
46
50
52
48
45
48
40
45
44
41
54
52
50
50
47
50
45
45
(a) Foreign sales as % of total sales (b) Foreign employment as % of total Transnationalization Index ([a+b]/2) (c) European a sales as % of total sales (d) European a employment as % of total Europeanization index ([c+d]/2) a
Excluding the Netherlands
b 1969
Note: Indices calculated from unrounded numbers. Sources: Derived from annual reports.
standing MNCs. 14 Taken together, the information presented here clearly shows how, during the last 50 years, one of the largest Dutch manufacturing MNCs successively gravitated towards non-European markets and increasingly established sales and production facilities outside Europe. The significance of its non-European subsidiaries was underlined by figures on employment, which clearly supported the view that the relative weight of Europe in the Akzo and Akzo Nobel Groups had gradually decreased.
DSM In 1902, the Dutch government established the mining company De Nederlandse Staatsmijnen (DSM), which was privatized in 1989. It eventually became a chemicals and pharmaceuticals company,
14
See Palmer (2003).
12 Figure 3. Geographical distribution of sales by DSM 1980—2003 (percentage shares)
100%
the Netherlands 80%
rest of the world 60%
Europe, excl. the Netherlands
40%
20%
0% 1980
1985
1990
1995
2000
2003
Source: DSM Annual Reports. .
Figure 4. Geographical distribution of employment by DSM 1975—2002 (percentage shares) 100%
the Netherlands
80%
total foreign employment
60%
rest of the world
40%
Europe, excl. the Netherlands
20%
0% 1975
1980
Source: DSM Annual Reports. .
1985
1990
1995
2000
2002
13 ranking fifth in the home country by annual turnover in 1973, fourth in 1983 and fifth in 1990.15 In 1980 the company ranked 90th globally by total sales.16 Figure 3 shows the geographical distribution of sales by the DSM Group 1980-2003. The first thing one notices is the diminishing relative significance of total foreign sales; from 63% in 1980 to 89% in 2003.17 Data obtained for the 1975—2002 period also show a continuous shift of activity from home to foreign countries, the share of foreign employment rising from 24% in 1975 to 55% in 2002. The major restructuring processes experienced by this company during the last 30 years are mirrored in the significant changes in the level of intensity of foreign activity. Both in terms of geographical distribution of sales and in terms of location of foreign employment, a gravitation occurred away from the home country. Moreover, the major part of this redeployment of business activity was outside the home region. Even so, Europe strengthened its position between 1980 and 1990 and maintained a strong position throughout the 1990s. Once again we see how a major MNC from a small open economy has tended to globalize rather than ‘Europeanize’.
Philips Prior to World War I the corporate network of Philips comprised sales companies in France and the US, and the company continued to establish itself in several other countries during the inter-war years. Foreign activity at that time also included cooperating with the General Electric Company in the US.18 In 1933 Philips began producing in the US. By 1945 the network of subsidiaries of the Philips Group covered approximately 20 countries in Europe, 24 countries outside the home region.19 Hence, already at that time the Group can well be said to have experienced a process of globalization. Three decades later (in 1975) the countries outside Europe included in the Philips network of majority-owned subsidiaries numbered 37.20 15
Bloemen, Kok and Zanden, van (1993), p. 29; Dunning and Cantwell (1987), p. 107.
16
UN—CTC (1983), p. 358.
17
DSM annual reports.
18
Philips Annual Report 1919.
19
Philips Annual Report 1946.
20
Philips Annual Report 1975.
14 Figure 5. Geographical distribution of sales by Philips 1980—2002 100%
the Netherlands
80%
total foreign sales
60%
rest of the world
40%
Europe, excl. the Netherlands
20%
0% 1980
1985
1990
1995
2000
2002
Source: Philips’ annual reports
Figure 6. Geographical distribution of employment by Philips 1929—2002 100%
the Netherlands 80%
total foreign employment rest of the world Europe, excl. the Netherlands
60%
40%
20%
Source: Philips annual reports; Blanken, (2002) p. 448
19 95 20 00 20 02
19 50 19 55 19 60 19 65 19 70 19 75 19 80 19 85
19 29 19 35 19 39
0%
15 Table 3. Foreign sales and foreign employment by Philips, various years 1930—2002
(a) Foreign sales as % of total sales (b)Foreign employment as % of total Transnationalization index ([a+b]/2) (c) Europeanb sales as % of total sales (d) Europeana employment as % of total Europeanization index ([c+d]/2)
1930
1935
1960
1965
1970
1975
1980
1985
1990
1995
2000
2002
..
..
..
..
..
..
92
94
94
96
96
93
32a
53
64
65
73
77
79
80
..
83
84
83
85
87
90
90
88
..
..
..
..
55
46
55
49
40
37
53
55
52
..
44
..
37
32
28
43
36
33
50
a 1929 b Excluding
the Netherlands Note: Indices calculated from unrounded numbers. Source: Derived from Philips annual reports.
We now turn to Philips’ foreign sales, beginning with exports from the home country. In 1945 Philips’ factories in the Netherlands were primarily producing for exports.21 In 1946 Philips’ exports amounted to approximately 19% of industrial exports by the Netherlands.22 Exports from the home country doubled from 1950—1954. Philips’ exports from the home country doubled in terms of volume between 1939 and 1950.23 Exports increased rapidly in the early 1950s; as much as by 100% between 1950 and 1954.24 The greater part of this increase fell to non-European markets. However, during the second half of the 1950s the increase in exports from the home country gradually shifted towards Europe.25 This trend then continued into the 1960s.26
21
The Philips annual report for 1944/45 gives no figures on exports, although it states that “In hoofdzaak werken onze
fabrieken in Nederland voor export”. 22
Philips Annual Report 1945/46, p. 12.
23
Philips Annual Report 1950.
24
Philips Annual Report 1955.
25
Philips Annual Report 1960.
26
Philips Annual Report 1965.
16 Figure 5 displays the relative geographical distribution of foreign sales by Philips at various points in time. Unfortunately, I have not been able to obtain figures for earlier than 1980. Nevertheless, there is one clear trend: a lesser part of the expansion of foreign sales has pertained to Europe than to overseas markets. Turning to foreign employment, the availability of historical data is much more favorable. Already in 1928 the share of foreign employment was as large as 29% of total employment.27 As depicted in Figure 6, the share of foreign employment in total employment gradually grew, reaching a peak of 84% in the year 2000. Figures on the division of foreign employment between Europe and the rest of the world are available from 1965 on. That very year, 53% of total employment was located in Europe, excluding the Netherlands, and a mere 12% in the rest of the world. In 2002 Europe excluding the Netherlands accounted for no more than 28%, whereas the share of the world outside Europe had increased to 55% (Table 3). In sum, judging by the figures presented here Philips has definitely globalized rather than Europeanized during the last 40 years. There has been a marked tendency by Philips to shift employment to parts of the world outside Europe throughout the post-war period.
Volvo In work done elsewhere, I have examined the historical globalization trajectories of a group of Swedish long-standing MNCs.28 I am gradually expanding that work by adding more detail to my cases and I also intend to successively include several more firms in my analysis. I have previously concentrated on companies with century-long histories, which means that I have still not included important Swedish MNCs such as Esselte, Astra and Volvo. Shortening the secular perspective and focusing on the last 50 years, as I do here, motivates the inclusion of companies such as those I mentioned. Accordingly, let us have a closer look at the foreign business activity of one of the most important Swedish manufacturing companies during the post-war period; the Volvo motor-company. When assessing recent figures on its foreign activity it is important to bear in mind the radical restructuring of the Group which was carried out in 1999 and 2000. In 1999 firstly, Volvo Cars was sold to the 27
Philips Annual Report 1928.
28
Palmer (2001).
17
Figure 7. Geographical distribution of sales by Volvo 1950—2003 (percentage shares) 100%
Sweden total foreign sales rest of the world Europe excl. Sweden
80%
60%
40%
20% 0% 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2003
Source: Volvo Annual Reports. .
Figure 8. Geographical distribution of employment by Volvo 1950—2003 (percentage shares)
100%
Sweden 80%
total foreign employment
60%
rest of the world
40%
Europe excl. Sweden
20%
0% 1965
1970
1975
Source: Volvo Annual Reports. .
1980
1985
1990
1995
2000
2003
18 Ford Motor Company. The year after that Volvo acquired the heavy truck businesses of French Renault and Belgian Mack. Hence until 1999 the Volvo Group was essentially a producer of cars, after that the Group principally turned into a producer of heavy trucks. However, in what follows neither the Renault nor Mack truck businesses are included in the figures of the Volvo Group. Beginning in the mid-1950s the Volvo Company still had great difficulties in exporting, due to high import tariffs in many European markets (30-40%).29 Nevertheless, looking at the share of foreign sales in total sales, as I prefer to do, we see that that category has steadily increased its share during the last 50 years. Figure 7 provides an overview of this long-term outward shift of markets by Volvo. By the 1980s the relative share of foreign sales in total sales had reached roughly the same level as that obtained by other large Swedish long-standing MNCs.30 Finally, in 2003 the share of foreign markets in total reached a historical peak of 92%. Differentiating between foreign sales in Europe and sales to countries outside that region, we see firstly that the home region gained considerably between 1960 and 1980. In 1980 half of total sales by Volvo went to Europe outside Sweden, and a quarter went to other parts of the world. After that, overseas markets continued to gain in relative weight, whereas Europe lost its predominance. After the selling of Volvo’s car division in 1999, an increase occurred in the share of Europe excluding Sweden. However, the home region rapidly regained its share of foreign sales in 2003, the same year that the share of foreign sales in total sales reached 92%. In order to assess geographical shifts in the location of productive activity of the Volvo Group, we need to have a closer look at employment figures. Figure 8 shows an increasing geographical scope of business activity and principally a shift away from the home country in terms of employment. However, not until after the year 2000 was there any significant change in the proportion of foreign employment pertaining to Europe. Part of this relative advancement of the share of European employment (and sales) is due to the restructuring of the Volvo Group and the separation from the Group of the production (and sales) of cars. Interestingly, Volvo is an exception amongst Swedish MNCs in this respect. As Table 5 demonstrates, other large, long-standing Swedish MNCs expanded more outside Europe in relative terms during the 1980-2003 period.
29
Volvo Annual Report 1955, p.6.
30
For a comparison with other large, long-standing Swedish MNCs see Palmer (2003).
19 Table 4. Foreign sales and foreign employment by Volvo, various years 1950—2003 Volvo I (a) Foreign sales as % of total sales (b) Foreign employment as % of total Transnationalization index ([a+b]/2) (c) European b sales as % of total sales (d) European b employment as % of total
Volvo II d
1950
1955
1960
1965
1971
1975
1980
1985
1990
1995
2000
2003
23a
27a
43a
46
68
71
75
82
83
85
88
92
..
..
..
11
13
27
28
26
31
41
54
65
28
40
49
51
54
57
63
71
77
..
..
17 c
26 c
..
40
50
35
44
45
43
52
..
..
..
..
..
18
22
15
18
23
23
38
29
36
25
31
34
33
45
Europeanization index ([c+d]/2) Exports from Sweden only Excl. Sweden. c Approximate figures. d From 1999 on the Volvo Group no longer includes the car division Notes:. Most indices (averages) calculated from unrounded numbers. Sources: Derived from Volvo annual reports. a
b
In order to gain a deeper insight into the geographical expansion and diversification of Volvo, this review of changes in the location of foreign employment by the Volvo Group can be supplemented by using information on the establishment of foreign majority-owned subsidiaries. Table 5 provides a historical overview of the number of countries and parts of the world covered by the subsidiary network of Volvo. In 1950 the group included two foreign subsidiaries: one in Finland and one in Argentina.31 However, five years later the shares in the latter company were sold, leaving the group with foreign subsidiaries only in Europe (in Finland and Denmark). In 1960 the Volvo group comprised foreign subsidiaries in Finland, the US, Canada, Peru, Venezuela, Norway and a new one in Switzerland. In 1965 also the Group also included production subsidiaries in Belgium (Gent) and an assembly plant in Canada. In 2000, finally, the Volvo Group obtained a global reach, when its subsidiary network
31
Volvo Annual Report 1950, p. 5.
20 Table 5. Geographical spread of foreign subsidiaries by the Volvo Group 1950—2003 Volvo I
Volvo II
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2003 Africa
PS
PS
Asia
PS
PS
PS
PS
PS
PS
PS
PS
Australasia
S
S
PS
PS
PS
PS
PS
PS
Latin America
S
North America Europe European countries covered by subsidiaries Countries
outside
Europe
covered by subsidiaries Totals
-
S
S
PS
PS
PS
PS
PS
PS
PS
PS
S
S
PS
PS
PS
PS
PS
PS
PS
PS
PS
S
S
S
PS
PS
PS
PS
PS
PS
PS
PS
PS
1
2
3a
7
8
10
10
8a
12
19
22 a
22
1
-
4
3
6a
8
11
11
7
12
14
14
2
2
7a
10
14 a
18
21
19 a
19
31
35 a
35
P= production; S= sales. Note: From 1999 on the Volvo Group no longer includes the car division. a Approximate
figures (exact size of some shareholdings unclear)
Sources: Derived from Volvo annual reports
covered all parts of the world. What is most interesting here is that the earlier assessment of a ‘Europeanization’ of Volvo is definitely confirmed. The figures in the third and second rows from the bottom of Table 5 tell us that the new Volvo Group (minus the car division) has continued to gravitate towards Europe.32 Summing up, the over-all relative intensity of foreign activity by the Volvo Group gradually increased during the 1950-2003 period. Moreover, the Group gradually widened its network of majority-owned subsidiaries, and at the beginning of the 21st century it finally established a ‘global reach’, that is, a presence in all parts of the world including Africa. Further, changes in the regional
32
The obvious drawback in this method of simply counting countries and parts of the world where the Group owned
subsidiaries at certain points in time is that all markets are given equal value. Instead, an ideal model of geographical expansion of business activity should include weighting the individual markets. In the case of Volvo, the weighting could be done, for example, according to the size of countries in terms of their relative share of the global car market – that is, if figures were available. Unfortunately, such figures on the relative significance of Volvo’s markets are not available. For a comparison with other large, long-standing Swedish MNCs see Palmer (2001) and (2003).
21 distribution of foreign business activity by the Volvo Group involved a gradual shift of such activity towards Europe (excluding Sweden), especially between 1960 and 1980. After its divestment of the car division in 1999 the Volvo Group attained both its highest relative level of over-all foreign activity and its highest level of foreign activity in Europe.
Changes in geographical distribution of foreign employment by Swedish MNCs since 1970 Appendices I and II summarize data on employment by Swedish long-standing MNCs during the period 1970-2003, focusing specifically on the relative distribution between Europe and other parts of the world.33 An underlying assumption here is that an increasing share of employment located abroad over time indicates a territorial shift away from the home country, and that an increasing share of employment in parts of the world other than Europe indicates a globalization tendency. The picture that emerges is, firstly, that the relative share of home country employment by all MNCs gradually decreased until the year 2000. After that, the home country has in some instances regained some of its relative share of total employment. This notably applies to Ericsson, who effected extensive lay-offs abroad as part of a radical restructuring programme. In sum, during the 1970-2000 period, Swedish long-standing MNCs in relative terms re-located employment away from the home country. Furthermore, in this outward shift there was a clear propensity towards other parts of the world than Europe. Interestingly, between 2000 and 2003 some of the companies (notably Volvo, but also SKF and Atlas Copco) increased the share of their employment located in Europe outside Sweden. All eight companies reviewed in this section display a globalization tendency. I have previously demonstrated how there was an increasing share of these companies’ total sales came about in other parts of the world than Europe.34 Taken together this clearly seems to point to a gradual de-Europeanization of foreign business activity on the part of large Swedish MNCs during the 1950-2000 period. Note, however, that there are indicators that the beginning of the 21st century may mark a turning-point and a possible stagnation of globalization of theses MNCs. (Recall that by globalization of a firm I here refer to a process whereby (i) increasing shares of sales and employment
33
I have previously assessed long-term changes in overall foreign activity by a group of large Swedish MNCs (Palmer, Richard (2001) and (2003)).
34
Palmer (2003).
22 are located abroad and (ii) increasing shares of total sales and employment are located outside the home region, that is to regions outside Europe).
Conclusion I began by noting that during the post-war period the export and outward FDI shares of Sweden and the Netherlands in world totals by far exceeded their respective shares in world population. Moreover, the economic openness of the Netherlands and Sweden on a per capita basis has been considerably more pronounced than that of the average of a group of 12 of the most advanced European economies. The overarching question posed was: should globalization and regionalization be seen as complementary or opposing, mutually enforcing or mutually excluding trends in the cases of Dutch and Swedish industry? The main objective has been to assess changes in the geographical distribution of foreign activity of Dutch and Swedish MNCs during the post-war period until 2003. To that end, this paper has employed data on the distribution of foreign sales and foreign employment (and occasionally of majority-owned subsidiaries) between the home countries, Europe and the rest of the world. I have not found any significant differences between the globalization trajectories of the Dutch and the Swedish MNCs, although the strong propensity away from Europe by the Philips Group seems to stand out. However, Ericsson did gradually globalize until 2000, increasing the relative share of its over-all foreign activity and concurrently diminishing its foreign business activity in Europe, but it remained considerably more embedded in its home country. Moreover, confining ourselves to the 1980-2000 period, a company such as Swedish Sandvik also displays a strong tendency of locating an increasing share of employment outside Europe. Finally, although Swedish Electrolux did increase its relative share of foreign employment both in and outside Europe, the actual level of total foreign employment abroad attained by the Group was considerably higher than that of Dutch companies reviewed here. Taken together, evidence of the spread of foreign activity in terms of sales and employment is somewhat contradictory. However, in relative terms expansion by long-standing Dutch and Swedish MNCs took place mainly outside Europe during the latter part of the 20th century. Nevertheless, Europe still accounted for ca 30—50% of the total foreign activity of most of the Dutch and Swedish long-standing companies in the 1980s and 1990s.
23 I have also found that the levels of relative business activity abroad and of geographical spread attained by three of the largest Dutch MNCs during the last two decades are unprecedented, as they are for most Swedish companies. As defined here, globalization of business activity by the three Dutch MNCs has been a long-term historical and gradual process. Only in the case of Philips can we possibly identify another period of rapid outward linking, apart from that occurring in the 1980s and 1990s. During the 1930s and from the mid-1960s to the mid-1970s that company performed a rapid territorial outward shift of employment. For AKU/Akzo and Akzo Nobel and for DSM globalization occurred by degrees. I have not been able to ascertain whether there have been parallel developments as regards the spread across regions by large companies from these two open economies, although the globalization tendency has generally been stronger than the tendency to ‘Europeanize’ in most cases, possibly indicated that world economic forces have influenced the outcome more strongly than political decisions and domestic forces. Hence, judging by the cases explored here, the different historical experiences of the Netherlands and Sweden and their different roles and positions in the international political economy - specifically their respective parts in the European integration process - do not seem to have decisively influenced the location of markets and investment (as mirrored in the deployment of their workforce) by some of their largest MNCs.
References AGA annual reports, various years. AKU annual reports, various years. AKZO annual reports, various years. Akzo Nobel annual reports, various years. Alfa Laval annual reports, various years. Atlas Copco annual reports, various years. Bloemen, E., Kok, J. and Zanden, J. L. van (1993) De top van industriële bedrijven in Nederland 1913—1990. Den Haag. Cameron, David R. (1978) ‘The Expansion of the Public Economy: A Comparative Analysis’. The American Political Science Review, vol. 72, pp. 1243—1260. Blanken, I. J. (2002) Een Industriële Wereldfederatie, Eindhoven. Philips Electronics NV. Dankers, J. J., Verheul, J. (1993) Hoogovens 1945-1993. Van staalbedrijf tot twee-metalenconcern. Een studie in industriele strategie. Den Haag, Sdu, 1993.
24 DSM annual reports, various years. Dunning, John H. and Cantwell, John (1987) IRM Directory of Statistics of International Investment and Production. Basingstoke: MacMillan Reference. Electrolux, annual reports, various years. Ericsson annual reports, various years. Katzenstein, Peter J. (1985) Small States in World Markets. Industrial Policy in Europe. London: Cornell University Press. Maddison, A. (1995) Monitoring the World Economy 1820—1992. Paris: OECD. Maddison, A. (2001) The World Economy. A Millennial Perspective. Paris: OECD. Palmer, Richard (2001) Historical Patterns of Globalization. The Growth of Outward Linkages of Swedish Long-Standing Transnational Corporations, 1890s—1990s. Stockholm Studies in Economic History, Almqvist and Wiksell International, Stockholm. _______________(2003) ‘Variations in the Regional Distribution of Cross-Border Activity of Swedish Transnational Corporations during the 20th Century’, Scandinavian Economic History Review 2003:3, pp. 7-27. Philips annual reports, various years. Rodrik, Dani (1997) Has Globalization Gone too far? Washington, D. C.: Institute for International Economics. Sandvik, annual reports, various years. SKF, annual reports, various years. UN (2002) World Population Prospects. Population database. UNCTAD (2002) World Investment Report 2002. New York and Geneva. UN—CTC (1983) Transnational corporations in World Development. New York: United Nations. UNSTATS on-line. Volvo annual reports, various years. WTO trade statistics (http://www.wto.org). Zanden, Jan L. van (1998) The Economic History of the Netherlands 1914—1995. A Small Open Economy in the ‘Long’ Twentieth Century. London: Routledge.
25 Appendix I. Geographical distribution of employment by Swedish long-standing MNCs, 1970—2003
Alfa Laval
Ericsson
100%
100%
Sweden
80% 60%
outside Europe
40% 20% 0% 1970
1980
1990
2000
2003
Europe (excl. Sweden)
80% 60% 40% 20% 0% 1970
1980
1990
2000
2003
SKF
AGA 100%
Sweden
80%
100% 80%
60%
outside Europe
40%
60% 40%
Europe (excl. Sweden)
20% 0%
20% 0%
1970
1980
1990
2000
1970
2003
Sandvik
1980
1990
2000
2003
Volvo
100% 80%
100% Sweden
80%
60% 40%
60%
outside Europe
40% Europe (excl. Sweden)
20%
20% 0% 1970
1980
1990
2000
2003
2000
2003
0%
Electrolux
1970 1980 1990 2000 2003 100%
Atlas Copco
80% 60%
100%
Sweden
80%
40% 20%
60%
outside Europe
40%
0% 1970
20%
Europe excl. Sweden
0% 1970
1980
1990
2000
2003
1980
1990
26 Appendix II: Geographical distribution of employment by Swedish long-standing MNCs, 1970— 2003 1970 Alfa Laval
Sweden
SKF
25
17
21
..
40
44
43
37
rest of the world
..
19
31
40
42 47
Sweden
46
42
40
37
a
31
30
30
25
26
rest of the world
23
28
30
38
27
Sweden
..
43
40
28
27
Europe a
..
50
46
36
35
rest of the world
..
7
14
36
38
19
18
10
13
12
a
61
67
69
52
55
rest of the world
20
15
21
35
33
Europe
Sweden
..
41
19
11
a
..
34
42
46b
rest of the world
..
25
39
43b
Europe
Electrolux
Atlas Copco
Sweden
..
39
18
9
4
Europe a
..
26
39
48
44
rest of the world
..
35
43
43
52
Sweden
..
32
20
9
10
a
..
38
36
31
34
rest of the world
..
30
44
60
56
72
69
Europe
Volvo I
Sweden Europe
Volvo II c
a
..
22
18
rest of the world
..
6
13
Sweden
46
35
a
23
38
rest of the world
31
27
Europe
a Excl.
Sweden.
b1999. c From
2003
41
Sweden
AGA
2000
..
Europe
Sandvik
1990
a
Europe
Ericsson
1980
1999 on the Volvo Group no longer includes the Volvo car division.
Source: Derived from annual reports.
