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

identified an

apparently distinctive form of multinational organization,

the Free Standing Company (FSC).[1] 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

provided through

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

divergent opinions

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

various types

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

provides a

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

scholarly inquiry.


Mira Wilkins, “The Free-Standing Company, 1870-1914: An Important Type of

British Foreign Direct Investment,” Economic History Review 41, no. 2

(1988): 259-282.