Multinationals in the New Europe and Global Trade

After a decade of Eurosclerosis the EC is moving with renewed economic growth and increasing multinational investment toward a single European market under the heading "Project 1992". The creation of a single EC market creates dynamic adjustment needs and opens up new opportunities for international business in a period of intensified global competition and dramatic politico-economic changes. Since the mid-1980s Eastern Europe is undergoing a radical shift towards market-based economic systems -a difficult and fragile development so far which is further complicated by economic and political unification of Germany in central Europe. After the era of British and, later, U. S. leadership in multinational investment German and Japanese multinational companies are becoming more influential players worldwide. Firms from Germany playa special role because German unification of 1990 implies a bigger home market, but also the diversion of total investment activities towards the greater German home market. While the political divide of Europe has ceased to exist, the economic division is becoming more apparent, and it could indeed transitorily increase because the EC 1992 project primarily generates growth impulses in Western Europe, while systemic transformations in Eastern Europe reduce output growth in the short term.

After a decade of Eurosclerosis the EC is moving with renewed economic growth and increasing multinational investment toward a single European market under the heading "Project 1992".

I Theoretical and Empirical Issues.- A. Internationalization of Production, Investment and European Integration: Free Trade in Goods, Technology and Assets?.- 1. Introduction.- 2. Trade and International Competition from a Dynamic Perspective.- 2.1 Links between Trade, Multinationality and Innovations.- 2.2 Trade in Goods, Technology and Assets: Stylized Facts.- 3. European Impulses for Global Competition and International Trade.- 3.1 Internationalization of Industry: A European Perspective.- 3.2 The Creation of the Single Market.- 3.2.1 Dynamic Aspects of EC 1992.- 3.2.2 Dumping Issues.- 3.2.3 EC Technology and Competition Policy.- 3.3 The Collapse of the East-West Antagonism in Europe.- 4. Free Trade in a Unifying World?.- 4.1 GATT Negotiations.- 4.2 Opening up East European CPEs.- 4.3 Prospects.- Comments.- B. Multinationals and Pricing to Market Behavior.- 1. Introduction.- 2. Theory.- 3. Specification, Data, Estimation, and Results.- 3.1 Specification.- 3.2 Data.- 3.3 Estimation.- 3.4 Pricing to Market in the Automobile Industry.- 4. Patterns of Production in the Automobile Industry.- 5. Conclusion.- Comments.- C. Foreign Direct Investment Outflow from the United States: An Empirical Assessment.- 1. Introduction.- 2. Overview of the Data.- 3. Determinants of FDI from the United States.- 4. Conclusion.- Comments.- D. Technology-Based Trade and Multinationals' Investment in Europe: Structural Change and Competition in Schumpeterian Goods.- 1. Introduction.- 2. Determinants of Comparative Advantage in High-Tech Industries.- 2.1 Product Cycle Models.- 2.2 Mobile and Immobile Schumpeter Industries.- 2.3 A Modified Product Cycle Model.- 3. Changing Patterns of Inter-Industry Trade.- 4. Summary.- Comments.- II. Multinationals in Action.- E. Foreign Direct Investments in Reforming CMEA Countries: Facts, Lessons and Perspectives.- 1. Introduction.- 2. Main Development Trends.- 2.1 Basic Figures.- 2.2 Expectations and Realities.- 3. Major Changes in the Environment of Foreign Direct Investment.- 3.1 The Legal and Institutional Framework.- 3.2 The Economic Environment of Foreign Direct Investment.- 3.3 Size of the Potential Market.- 4. Some Critical Areas and Attitudes.- 4.1 Treatment of Foreign Versus Domestic Investments.- 4.2 Adverse Impacts on the Balance of Payments?.- 4.3 Potential Markets: Industrialized World, USSR or Both?.- 4.4 Is Growing Dependence on FDI Dangerous?.- 5. Prospects and Tasks Ahead.- 5.1 Growing Interest in Central and Eastern Europe.- 5.2 Differentiated Approaches.- 5.2.1 Location Choices.- 5.2.2 Behavior of Potential Investors.- 5.3 Main Tasks Ahead.- 5.3.1 Tasks of the Host Countries.- 5.3.2 Western Contribution.- 5.4 The Political Scope.- Comments.- F. German Multinationals in Europe: Patterns and Perspectives.- 1. Introduction.- 2. German Multinational Enterprises: A Macro-Economic View.- 3. Regional Orientation of German FDI.- 4. German FDI by Industries.- 5. Case Studies: Daimler Benz and BASF.- 5.1 Globalization Strategies.- 5.2 Correlation between German FDI and International Turnover of DB and BASF.- 6. Internationalization of the Ruhr Region.- 7. Perspectives.- Comments.- G. The Effects of Integration on the Structure of Multinational Corporation Activity in the EC.- 1. Introduction.- 2. The Technological and Organizational Advantages of Japanese Firms as a Determinant of their Involvement in Europe.- 3. The Likely Effects of Japanese Inward Direct Investment Post 1992.- 4. The Reorganization of MNC Activity within Europe.- 5. The Determinants of MNC Rationalization in the EC.- 6. The Industrial Impact of the Reorganization of Technological and Other Activity by MNCs in the EC.- 7. Third World MNCs in Europe.- Comments.- H. Japanese Multinationals in Europe and the United States: Some Comparisons and Contrasts.- 1. Introduction.- 2. A Theoretical Digression.- 3. The Role of Foreign Direct Investment by Japan Prior to the 1980s: A Brief Overview.- 4. Key FDI Strategies in Europe and the United States: Comparisons and Contrasts.- 4.1 1980-1984: Defending Current and Future Export Markets.- 4.2 Location Advantages in the United States and Europe.- 4.3 Summary and Conclusions: Why the Trade-Sustaining Investments of the Early 1980s were Unsustainable after 1985.- 5. 1985-1988: Transferring Existing O Advantages to Foreign Territories.- 5.1 Variables Triggering the Change.- 5.2 The Nature of the Changes: Same Sectors, Different Structures.- 5.3 Japanese O Advantages in Automobiles: A Brief Case Study.- 5.4 Moving Japanese O and I Advantages to the Foreign Marketplace.- 6. 1989 and Beyond: Creating New O Advantages as Regional Insiders.- 6.1 1988-1989: Europe Takes the Lead.- 6.2 Exploiting the L Advantages of Regional Markets.- 6.3 Exploiting the O Advantages of Local Firms.- 7. Conclusions - after 1990: Rising O Advantages of Japanese Multinationals, Falling L Advantages of Japan?.- Comments.