Table Of ContentHarvard Studies in Business History XXVII
Edited by Alfred D. Chandler, Jr.
Isidor Straus Professor of Business History
Graduate School of Business Administration
George F. Baker Foundation
Harvard University
The Maturing of Multinational Enterprise:
American Business Abroad
from 1914 to 1970
Mira Wilkins
Harvard University Press Cambridge, Massachusetts 1974
©Copyright 1974 by the President and Fellows of Harvard College
All rights reserved
Library of Congress Catalog Card Number 73-88499
SBN 674-55475-2
Printed in the United States of America
Editor's Introduction
For more than forty years, volumes published in the Harvard Studies in
Business History have contributed to an understanding of the American
past. For a long time its editors—Norman S. B. Gras, Henrietta Larson,
and Thomas R. Navin—concentrated on publishing books about indi-
vidual business enterprises and businessmen of the late eighteenth- and
nineteenth-century America. Of the first twenty volumes published in the
Studies, all but three were this type of case study. Under the able editor-
ship of Ralph W. Hidy, the focus of the series broadened. While topics
in nineteenth-century American business continued to be central, both
Arthur M. Johnson's Petroleum Pipelines and Public Policy and Vincent
P. Carosso's Investment Banking in America concerned themselves with
twentieth-century business, and Raymond de Roover's study of the Me-
dici bank was the first and still the only book in the series on a non-Amer-
ican topic. My hope is to broaden still further the scope of the series.
While in no sense intending to exclude books on eighteenth- and nine-
teenth-century American business history, I would like it to include more
studies on the twentieth century, on the business history of other nations,
and particularly on topics that cut across national boundaries and in-
clude more than a single enterprise or even a single industry.
Mira Wilkins's The Maturing of Multinational Enterprise thus pro-
vides an admirable volume with which to embark on a policy of
expanding the scope of the series. Although it still deals with American
business enterprises, it considers the history of many firms operating in
many industries and doing so in an international and twentieth-century
setting. For this reason the story she tells is central to the understanding
of the development of modern, large-scale business enterprise and of its
changing role in the international economy.
Indeed the enterprises that Dr. Wilkins examines are among the most
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Editor's Introduction
powerful private economic organizations the world has yet seen. These
multinational corporations are the largest and most complex of the
giant, integrated, and diversified business enterprises that have come to
dominate major sectors of nearly all technologically advanced industrial
economies. These enterprises have become responsible for handling a sig-
nificant share of the flow of funds and of goods—raw and semifinished
materials and finished products—across international boundaries and for
making long-term investments in plant and personnel in many different
nations. The centralization of this supra-national economic power, both
as to the control of short-term flows and the determination of long-term
capital investment, is suggested by the fundamental shift that has oc-
curred since World War I in the method of overseas investment. Al-
though by 1914 United States direct investments abroad far exceeded its
portfolio stakes, the much larger European investments were predomi-
nately indirect in the form of stocks, bonds and other securities. By 1970
close to 75 per cent of all foreign investment had become direct stakes in
enterprises controlled by multinational companies.
In nearly all nonsocialist advanced economies, large private enterprises
have come to make direct investments overseas. The American multina-
tionals are, however, far more numerous and on the whole larger than
those of other nations. Their history, therefore, is of particular impor-
tance for the understanding of the growth and activities of this relatively
new economic institution.
In relating their story, Dr. Wilkins has concentrated on the historian's
basic task of getting the chronological record straight. By careful and
painstaking research she has indicated what happened, when, and how.
Nor does she neglect the why. Others may have different reasons as to
why these developments occurred, but they, and indeed all scholars ana-
lyzing the experience of the multinational enterprise, will have to rely
heavily on the record Dr. Wilkins presents here. Her history must long
remain a basic source for historians, economists, and political scientists
who wish to explain the rise and continuing domination of large-scale
business enterprises in modern market economies, to understand the
growth and changes in international and national economies since World
War I, and to study the interrelationships between national economic
policies and priorities and a changing international economic order.
Alfred D. Chandler, Jr.
Author's Preface
Today the multinational corporation is an important economic institu-
tion. Most of the major American corporations do not confine themselves
to domestic operations but participate widely in business beyond the na-
tional frontiers, having direct investments in many countries. Through
the multinational corporation, men, capital, goods, management meth-
ods, technology, marketing techniques, and general skills cross over na-
tional boundaries. The American multinational corporation has influ-
ence on the United States and on foreign economies. Its impact has
become vast.
Such a formidable institution did not suddenly spring into existence.
Contrary to what has often been maintained, U.S. corporations with in-
terrelated direct investments abroad are not unique to the 1950s, 1960s,
and 1970s. Rather, the multinational corporation has emerged, grown,
and changed over many decades, altering its strategies to respond to chal-
lenges and sometimes facing defeat when the challenges have been too
great. Companies in certain industries and sectors have fared better than
others. The development of multinational enterprise has been an uneven,
complex, multifaceted process.
The present study is the second of two books designed to provide the
first comprehensive history of U.S.-controlled multinational business. The
story, begun in The Emergence of Multinational Enterprise: American
Business Abroad from the Colonial Era to 1914, published by Harvard
University Press (1970), is here carried to 1970. In both books I have
been concerned with when, which, why, how, and where American busi-
nesses went abroad and in the present volume, especially, with how U.S.
enterprises got along once in alien lands. Thus, I am interested in the
entry of U.S. companies into new direct investments outside the United
States and in the experiences of existing branches, subsidiaries, and affili-
ates of those businesses in foreign countries. Throughout, I have sought
viii
Author's Preface
to appraise the influence of economic, technological, political, military,
and social considerations in the United States and abroad on the interna-
tionalization of American business.
In 1914, the roots of present-day American multinational enterprise
were practically all evident. Worldwide, U.S. direct investments existed.
Already, certain companies had developed multinational strategies. Yet,
it is after 1914 that the blossoming and vast influence of the U.S.-head-
quartered multinational corporation came of age. World War I repre-
sents a watershed in the history of multinational enterprise and accord-
ingly provides a fine place to begin the present volume.
Part One herein includes the impact of the First World War and the
Mexican and Russian revolutions on American business abroad. In Part
Two I document the growing U.S. corporations' surge of commitment to
foreign operations during the prosperous years of the 1920s. Part Three
covers the lessening of the commitment with the Great Depression and
the muted concern of most but not all U.S. enterprises in international
business in the 1930s; the exceptions are also revealed. Part Four deals
with the changed circumstances that faced U.S. business abroad during
World War II and in its immediate aftermath. Part Five turns to U.S.
corporations' greatly revived enthusiasm for multinational ventures in
the late 1950s and 1960s. Although Part Five is devoted to current events
(1955-1970), I make no claim to probe in depth into the contemporary
experiences of multinational enterprises. Rather, this study's originality
and its contribution should lie in its putting today's U.S.-headquartered
multinational enterprise in the perspective of American international
business history and in its indication of what elements appear to be new
and which do not. In the concluding part of the book (Part Six), I have
sought to combine the findings of this and the first study to seek a tenta-
tive "evolutionary" model of the development of U.S. multinational
enterprise—one helpful to our understanding of the course of direct for-
eign investments by manufacturing, petroleum, mining, and other U.S.
companies; I have then attempted to apply the model to U.S. business in
the various sectors.
One of the most striking overall features to surface from my inquiry
into American business abroad 1914-1970 has been the dramatic U.S.
corporate challenge to European enterprise worldwide. In 1914, only in
nearby Mexico, Cuba, Panama, and perhaps parts of Central America
did the amount of U.S. business exceed the contribution of British inves-
ix
Author's Preface
tors. The decades after 1914 saw U.S. capital triumph over European
throughout the western hemisphere and as far away from home as Libe-
ria and Saudi Arabia. Hopefully, this book will give the reader a sense of
the reasons behind and the pace of that accomplishment.
A second striking feature to emerge from this study is the variety of
positive, negative, and mixed responses of the United States and foreign
governments to the spread of U.S. private enterprise abroad. This book
seeks to evaluate and to define some of the divergent foreign and domes-
tic governmental policies that shaped the course of U.S. business outside
this country. I have tried to indicate when, which, and whether specific
government policies influenced the development of U.S. business abroad.
Third, this book should demonstrate the cumulative nature of the ac-
tivities of American business abroad. What I am writing about is the pro-
cess of business growth. For U.S. business, integration, diversification,
and direct foreign investment, as we will see, are all part of the same pro-
cess.
It is difficult to record, to synthesize, and to present the history of
American business abroad from 1914 to 1970 because the materials avail-
able are so immense, the ways of approaching the subject so many, and
the implications so profound. Yet, this is what I have attempted. For
sources of information, I have used company records, letters and reports
in the National Archives, university and financial collections, "oral his-
tory" files, and the abundant published data (both governmental and pri-
vate). My research abroad has been assisted by interviews with U.S. em-
bassy officials and representatives of foreign governments (including one
head of state, the president of Liberia). Of vital importance in enriching
my understanding of international business have been my interviews and
discussions with literally hundreds of businessmen; these took place in air
conditioned offices, but also in plush restaurants, in desert sand storms,
in 112° heat, in snow blizzards, and at altitudes of almost 15,000 feet; in
important world capitals and urban centers, but also in spots such as Ah-
madi, Awali, Calama, Chihuahua, Golfito, Ndola, Nsuta, Paramonga,
Ras Tanura, and Selukwe. Even the most talented geography student
may feel the need to consult his maps to discover these cities or towns in
Kuwait, Bahrain, Chile, Mexico, Costa Rica, Zambia, Ghana, Peru, Saudi
Arabia, and Rhodesia where enterprising Americans had operations.
I am concerned herein not simply with U.S. businesses that exported
to foreign markets or with those that purchased goods abroad. The enter-
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Author's Preface
prises that this study deals with all embarked on operations abroad. This
also means that I am not concerned with U.S. portfolio investments (in-
vestments in bonds or stocks that did not carry the power to influence de-
cisions). Rather, my interest is in U.S. direct investments abroad—that is
with foreign investments by U.S. companies involving management re-
sponsibility, the possibility of a voice in management, and direct business
purpose.* My research has covered both market-oriented stakes abroad
(U.S. investments designed to supply foreign markets, including those in
selling, manufacturing, petroleum refining, public utilities, and other ser-
vices) and supply-oriented stakes abroad (U.S. investments made for ex-
port from the host country, designed to fill the needs of the United States
or third-country markets—including those investments in purchasing,
certain types of manufacturing and processing, oil producing and refin-
ing, mining and smelting, and agriculture).
For the years covered by this book, 1914-1970, statistics exist on the
book value of U.S. direct investments abroad—by region and sectors.t
The best figures for my purpose have been compiled by Cleona Lewis (as-
sisted by Karl T. Schlotterbeck) and by the U.S. Department of Com-
merce. Their data are included throughout. The reader is, however, cau-
tioned to be wary. The compilers encountered many difficulties in
making their estimates, and thus their figures are subject to error. Others
have made estimates that do not coincide (some of these estimates are
also introduced, when relevant). The figures presented herein are gener-
ally satisfactory only as rough guidelines. I have not developed new sta-
tistical data; instead, I have employed these earlier valiant efforts of
others—efforts which I have truly appreciated.
I hope the reader will have patience with the detail and in the process
of reading this book will become acquainted with and fascinated by the
extent, the nature, and the growth of the participation of U.S. business
around the world.
* For more on my selective mechanism, see my The Emergence of Multinational En-
terprise: American Business Abroad from the Colonial Era to 1914, pp. x-xi. Note that
from 1914 to 1970, with the possible exception of 1929 (estimates issued by the U.S.
Department of Commerce differ), private U.S. investors have always had greater long-
term direct than portfolio investments abroad.
t Not for every year, but there are enough numbers to indicate general trends.
