Published by EH.NET (July 1999)
Mira Wilkins and Harm Schroter (eds). The Free Standing Company in the
World Economy, 1830-1996. Oxford: Oxford University Press, 1998. xxi + 480
pp. Tables, maps, notes, bibliography, and index. $95.00 (cloth). ISBN
Reviewed for H-Business and
EH.NET by Gordon Boyce, School of Economics and Finance, Victoria University of
The Free Standing Company: Theory and Evidence
In 1988, Mira Wilkins published what proved to be a provocative paper that
apparently distinctive form of multinational organization,
the Free Standing Company (FSC). Whereas, the “classic” U.S.-style
multinational enterprise, the subject of Wilkins’ earlier work, represented an
across border extension of managerial and organizational capabilities
internalized within a hierarchical structure, the FSC was a much different
species first associated with British direct foreign investment. The FSC had no
foundation in an established business based in the U.K., it had a very small
head office at home, it raised equity from domestic investors and committed
these funds overseas in sectors characterized by relatively unsophisticated
technology. While the “classic” integrated multinational firm appeared in
technologically advanced industries to transfer production expertise,
managerial know-how, or brand identities overseas, the FSC focused on single
function operations mainly in mining, infrastructure, or plantation projects.
Wilkins found that many FSCs were short-lived-they proliferated especially
between 1880 and 1914-either because they were financial shams or because they
lacked the managerial capability to survive and prosper. Although the FSC
differed markedly from hierarchical multinationals, it did support direct
foreign investment as opposed to the passive portfolio type of investment that
made up most of Britain’s overseas commitments. The FSC proved to be something
of a misnomer,
however, since they were usually affiliated with clusters of enterprises that
contractual as opposed to hierarchical devices a range of supporting services,
including, management, distribution,
transport, and procurement. In some cases, FSCs were adjuncts to merchant
groups and overseas business networks.
The present volume, which Wilkins edited with Harm Schoter, consists of a
series of theoretical, empirical, and statistical papers presented at the
Eleventh International Economic History Congress held in Milan in 1994.
This is not, however, a typical collection of conference
Instead, the authors have substantially revised their findings in light of
criticisms offered at the meetings and have taken up issues debated by the
other participants. The result is a very lively volume that reflects the
and viewpoints of eighteen leading scholars in the field of multinational
business. It really is a hard volume to put down once one picks it up.
The Free Standing Company consists of four sections. The first consists of a
masterful introduction to the subject and the issues by Wilkins, followed by
two papers by Mark Casson and J-F. Hennart who debate the main theoretical
points, and concluded with a skeptical assessment by T.A.B.
Corley. The second part presents six empirical studies of countries and geo
graphic regions that were hosts to FSCs. P. Hertner examines Italy, N.
probes the Russian experience, and S. Chapman investigates India and the Far
East. R. Miller explore FSCs on the West Coast of South America, R. Liehr and
M. E. Torres Bautist a cover Mexico, and T.
Szmrecsanyi looks at the Brazilian sugar industry. The third section considers
countries from which FSCs originated. B. Gales and K. Sluyterman evaluate the
Dutch evidence, while Harm Schoter examines Belgium, Germany,
and Switzerla nd. Geoff Jones considers British banks as FSCs, W.J. Hausman and
J.L. Neufeld assess U.S. overseas investments in utilities, and G.
Marchildon writes on Canadian FSCs in the same sector. In the final section,
Wilkins returns with an overview of the issues debated, an assessment of the
usefulness of the FSC concept, and a list of suggestions to guide the direction
of future work in this field.
Wilkins proposes that the FSC provides an idea of analytical and heuristic
value. It has led to quantitative reassessment of the size of direct foreign
investment relative to portfolio flows and attempted to compare the extent of
FSC investment with that undertaken by the integrated U.S.-style firms.
Clearly, the FSC is a slippery concept: the papers reveal the problem of
accurately determining national origins and the ways in which it challenges
institutional theory. What is particularly fascinating in this regard is the
way the FSC acted as an intermediate mode, or contractual device, for arranging
of agreements between a network at home with another network operating abroad.
With small, “lean” headquarters, the FSC as an instrument for exerting control
over offshore business is the subject of debate. Here, it may be useful to
consider different gradients and distinct types of influence projected by both
the head office and the overseas unit. The specific nature of those assets
(other than capital)
that FSCs transferred abroad is another focal point for searching discussion.
Linked to these issues is consideration of the sectors FSCs invested in: what
was their competitive advantage as co-ordinating instruments? In this regard,
the characteristics of their home and host countries are important as is the
broader social and political context they operated in. The relationship
between FSCs and the clusters of enterprises that supported them is another
fascinating area, and a number of chapters identify promising approaches for
future work. Finally, the reasons for the decline–but not the complete
disappearance–of these firms raises questions about institutional durability
the face of environmental change.
The range of concerns raised by the concept attests to its value and must
attract a wide readership to this volume. Those interested in institutional
economics will find the theoretical chapters and the case studies particularly
stimulating. The book will be useful to scholars of multinational enterprises
of all types, international business, and, of course, business and economic
history. The volume will also serve as a teaching tool for showing advanced
students how leading authorities develop questions and refine their methods of
inquiry while they grapple with the implications of a new concept. Finally,
The Free Standing Company
model for anyone intending to arrange for the publication of conference
proceedings in a way that closely integrates individual contributions, provides
complementary perspectives on a central topic, and preserves the true spirit of
Mira Wilkins, “The Free-Standing Company, 1870-1914: An Important Type of
British Foreign Direct Investment,” Economic History Review 41, no. 2
|Geographic Area(s):||General, International, or Comparative|
|Time Period(s):||General or Comparative|