Figure 2
The empirical evidence show that a sharply rise in foreign companies closely relates to a high number of employment opportunities. During 1980-2004, local employment in BOI enterprises grew up from 10,538 to 437,698 which around 87% of its increasing created by MNEs and more than 95% of the employment opportunity growing were in the manufacturing segment (Ratnayake and Edirisuriya, 2008, cited in Athukorala, 2002, BOI, 2005). The total figures of employee and foreign firms in UK in 1996 were larger than the previous year as the same pattern. As it should be, the employee amounts of foreign firms noticeably moved up in all countries except Canada and Sweden. Nonetheless, a number of staffs Australia and New Zealand obviously reduced almost 22% or around 3,400 positions in 1996 in despite of Australia and New Zealand enterprises in UK enlarged at that time. Since FDI of some countries highlighted on capital rather than labor intensive so it might be explained this noticeably differences of employment. Besides, a progress of worker numbers in all countries was not only from new post creations via greenfields but also from job transferrals by a change of ownership in term of acquisition. As a result, it could be said that US generated nearly 380,000 positions in total consisting of new job creation as well as post transferrals prior to the European Unions which increased a number of employments higher than 59,000 posts in 1996. The United States still had the highest proportion of employment held by MNEs which over 45% in 1995 and 1996 while Italy, Belgium and Asia (non-OECD) held the least percentages. Worker amounts of Japanese multinational firms were greater than earlier year over 5,000 jobs as same as France.
Figure 3
In term of compensations per employees, the trends of average wages were higher in 1996 in all countries except Canada, Sweden and Australia and New Zealand. In particular the European Unions, salary proportion increased almost 4% which were larger than US, raised just 1.5% in 1996. In other word, employees of the European Unions MNEs in UK gained earnings greater than last year approximately 35% whereas US worker revenues increased by 22%. However, the United States still shared the highest proportions by over 45% of total wages and salaries in OECD during both periods. Workforce in US multinational companies obtained the highest incomes for both years followed by the European Unions and Germany. In contrast, Asia (non-OECD) affiliates in UK paid their staffs the lowest rate by only 66 in an average in 1996. Although the percentage of employee numbers held by Japanese and France affiliates was quite similar, Japanese multinational enterprises provided lower percentage of returns to their personnel than France by 1.3 and 1.4 in 1995 and 1996, respectively. With focusing on capital intensive of Australia and New Zealand, average compensations of these countries dropped off as the same trend as employee figures decreased in 1996. It is notably seen that the salary gaps between Japan and US or the European Unions are obviously extensive. This is also considered as one of the big threats for Japanese foreign direct investment in UK since Japanese multinational firms need to raise human resource cost to compete with other MNEs which pay higher compensations.
Figure 4
OECD (2008) states that the affiliates are inclined to grow and contribute directly the host economy’s productivity growth rather than domestic companies because they often focus on more R&D, innovation and skill intensive sectors than local firms. Besides, the host economy is probably gain indirect advantages from foreign affiliates by technology and knowledge transfer through employees. When those trained staffs resign and move into domestic firm, knowledge and technique also spillover to local company and diffuse to supplier and distributer in the host country eventually (Javorcik, 2004). The effectiveness of foreign affiliates may impacts local business by increasing competitive pressure. As a result, domestic firms are forced to develop novel technology and their productivity (OECD, 2008, cited in Blomstrom and Kokko, 1997). Consequently, the United Kingdom also gained some benefits from rising R&D investment by MNEs accounting for more than GBP 4,000 millions in total in 1997. American multinational corporations were the largest R&D investment of foreign companies amounting to approximately 40% - 45% in these periods prior to the European Unions and Japanese affiliates. Between 1994 and 1997, only R&D investment of US and the European Unions MNEs increased in value but their percentages in total OECD declined as well as in all countries except the European Unions which their shares were quite constant. Regarding to R&D investment of Japanese affiliates, it was significantly lesser than American and the European Unions. Moreover, the share of R&D spending in total OECD fell gradually from 11.1% to 5.9% in 1994 and 1997, respectively. High R&D payments of US MNEs or even any countries are a hard pressure for Japanese multinational businesses to vigorously develop their technologies especially in high-tech industries like the Company which manufactures electronic equipments.
Figure 5
Concerning to production, MNEs of all countries contributed gross output nearly GBP 150,000 millions to UK in 1996. The share of manufacturing production in total OECD created by foreign affiliates varied from 57% by American multinational companies, to just 0.3% by Asia (non-OECD) multinational enterprises in 1996. In exceptional with US and the European Unions, the rest of countries shared less than 10%. The trend of gross output in all countries went up in value except Canada, Sweden and Australia and New Zealand. In General, the more multinational companies R&D invest, the more gross output they should be gained. In other word, the movement of gross output should be changed as the same pattern as the R&D expenditures. For instance US MNEs spent R&D costs in 1996 greater than in 1995 amounting to GBP 87 millions so that they acquired higher gross output by GBP 15,501 millions in 1996. It was remarkably that productions of some countries such as France obviously grew accounting to approximately GBP 2,300 millions and its proportion of production in total OECD increased by 0.5% between 1995 and 1996. In spited of R&D expenses of France MNEs slightly dropped in both of value and proportion in those periods. In addition, Japanese multinational firms spent in R&D investments around double larger than France affiliates in 1995-1996 while the gross output of these countries was quite similar. It could be described that the discrepancies in R&D expenditure depended either on variations in technology intensity of foreign firms or a preference of investing R&D in home countries and then transferred novel technologies from parent companies to subsidiary in host countries.
As discuss above, UK is one of most attractive areas for FDI in particular high-tech manufacturing industries. Nonetheless, there are several threats for the Company to invest in England. Firstly, Japanese multinational corporations remained weak to penetrate in UK as we can obviously see only a small share of Japanese affiliates in UK. Regarding to employment, Japanese MNEs definitely faces with culture differences in employment systems, labor market as well as social context (Westney, 2001). Thirdly, high compensations of other competitive countries such as US and the European Unions are very crucial factor for decision making. To compete with dominant competitors, the Company needs to increase wages which certainly affects to minimize the Company’s profits. Last aspect is the huge R&D investment of the United States together with the European Unions. This is a hard work for Japanese affiliates to compete with powerful competitors like those countries which far greater invest in R&D than Japanese MNEs. For that reason, I would like to suggest the Company to invest in other countries such as China which becomes the world’s leading host of foreign direct investment (FDI) (Foreign Policy, 2004). China can be a good based for manufacturing because they can provide the lowest labor cost of menial laborers. Together with a large and rising number of specialists, such as engineers, scientists and skilled technicians, China also has more invested in research and development (R&D), which reached at 1.4% of GDP in 2006 (Brandt and Rawskialso, 2008). Moreover, it may be easier to invest in China because the cultural problem will be cut off due to the similar business culture between China and Japan.
References
Brandt, L. and Rawski, T. G. (2008) ‘China great Economic Transformation.’ China Business Review, 35(6), pp.30-33.
Foreign Policy (2004) ‘The WTO’s Tough Road.’ Davos Report, pp.21-22.
Javorcik, B.S. (2004) ‘Does Foreign Direct Investment Increase the Productivity of Domestic Firms? Is Search of Spillovers Through Backward Linkages.’ American Economic Review, 94(3), pp. 605-627.
OECD (2002) Measuring Globalisation: The Role of Multinaitonals in OECD Economies. London: OECD Publishing.
OECD (2008) Staying Competitive in the Global Economies. London: OECD Publishing.
Ratnayake, P. and Edirisuriya, P. (2008) ‘Japanese Foreign Direct Investment in Asia: Experience from Sri Lanka.’ Journal of Accounting – Business & Management, 15(2), pp. 74-93.
Westney, D. E. (2001) Japan. Oxford: Oxford University Press.