Globalization or Europeanization:

Evidence on the European Economy Since 1980

Neil Fligstein

Department of Sociology

University of California

Berkeley, Ca. 94720

May 1999
 Introduction

At the core of the European Union, has been the gradual

creation of the "single market" across western Europe. The

European Union began as the European Coal and Steel Community

(ECSC) and expanded to become the European Economic Community

(EEC). The original intent of the ECSC was to stabilize the

production of steel across Europe in order to prevent ruinous

competition. The EEC formed to expand the activities of the

alliance to cooperation in agricultural policies and various

industrial policies. The Treaty of Rome which produced the EEC,

had the goal of reducing tariffs and other trade barriers,

thereby promoting free trade and economic growth. Both Schumann

and Monet, the principal intellectual architects of the EEC felt

that if the European societies had economies that were more

integrated, governments would be less tempted to engage in

military activities that would end up in war.

The purpose of this chapter is to consider how Europe became

economically integrated. The central theme is that European

economic integration is near to completion in two ways. First,

the EU has provided a common set of rules that make it difficult

for governments to raise barriers to entry to foreign firms and

markets, at least formally, are open. Second, trade between

European countries now accounts for almost 40% of GDP. Moreover,

70% of the exports from the countries that make up the EU are to

other countries in the EU. Globalization in Europe is not about

the increase in either Asian or American exports to Europe, but

instead it is about "Europeanization". The economies of western

Europe are now tightly interlocked.

A second theme, is that in spite of "Europeanization",

national capitalisms across western Europe persist. The largest

firms in the European economy remain resolutely German, French,

Swedish or Italian in ownership and investment. Only in Great

Britain have large firms been taken over extensively by foreign

ownership. I argue that the main reason for this persistence is

that Europe has so far resisted creating a single market for

property rights. It is difficult or impossible to engage in

hostile takeovers of continental European firms. The national

ownership of firms remains the rule, with some notable

exceptions. Nationally owned firms continue to invest primarily

at home.

These two main results show the contradictory nature of

Europeanization quite clearly. From the perspective of the top

leadership of many of Europe's largest firms, they are major

participants in markets Europe and to a lesser degree the U.S.

(In general European firms do not have a high Asian profile.)

This makes them firm supporters of free trade and the monetary

union and in general strong supporters of the EU. At the same

time, a large proportion of shareholders and workers remain in

the nation where the firm is headquartered. Their experience of

Europe and their sense that their jobs depend on Europe is much

less pronounced. They remain firmly wedded to a national

conception of property rights and labor relations.

 How do we make sense of Europeanization of the economy? In

the literatures that compare market arrangements across nation

states, there are two images that are juxtaposed. First, there

are many scholars who support the view that eventually there will

be convergence in the way that markets and firms are organized

across societies. The sources of these convergence usually

emanate from some form of competitive process. The argument is

that when firms meet in a market, there is some most efficient

way to organize that revolves around the appropriate use of

technology, social organization, and investment. Thus, market

forces produce convergence towards a single way of doing things.

This point of view is often the justification for arguments

about how globalization (defined as the integration of world

markets for goods and services) forces firms to reorganize. If

firms from one society figure out the most efficient way to

produce a set of products, then firms from all other societies

will have to emulate those firms or fail. A similar argument has

been applied to government interventions (Couch and Streeck,

1996; Drache and Boyer, 1996; Garret, 1995). Governments that

persist in producing trade barriers, protecting workers, and

engaging in too much taxation of firms, will over time lose firms

to societies where firms have friendlier arrangements. This

forces governments to dismantle worker protections, free up

capital markets, and deregulate other markets.

The problem with these plausible arguments, is that there is

little evidence that they are true (for reviews, see Fligstein

and Freeland, 1995; Pauly and Reich, 1997; Wade, 1996). Studies
typically show that governments continue to sponsor a great

number of policy interventions into capital and labor markets.

There is little evidence that there has been a race to the bottom

to undermine the protection of workers in advanced industrial

societies. There is also little evidence that the so-called

global corporation has converged to either a network or

"informational" form (Fligstein, 1998). Almost 30 years ago, the

political economists Raymond Vernon (1967) and Charles

Kindleberger (1970) argued that the leaders of multinational

firms were people who quickly were becoming nations unto

themselves. They predicted the growth of a international

capitalist class that would have no national loyalties. Thirty

years down the road, when the evidence is examined, this claim

turns out to not be true.

Given the contrasting images, one that emphasizes how market

forces should produce convergence in firms and government

policies, and the other of a world where national capitalisms

persist, one is left to wonder about where the truth really lies.

The purpose of this chapter is to untangle these questions in the

context of Europe. Europeanization, as it turns out, produces

evidence to support both of these arguments. On the one hand,

there has been much convergence across Europe in terms of

producing markets with participants from many societies. On the

other, there is little evidence that this convergence has

produced a capitalist elite that transcends national borders.

Indeed, large firms remain owned by people in particular

societies, by and large, and dependent on their home governments

for many things.

My basic argument begins by trying to define what an

integrated market would look like for a given commodity. I use

the theory of fields elaborated to the context of markets to

produce conceptual leverage on this question. I argue that an

integrated market requires a single system of rules of exchange,

property rights, and rules of competition and cooperation. To

produce a stable market requires that a "local" set of rules

evolves in a particular market that defines which firms are

dominant and why and which are peripheral.

One of the main reasons that national systems have proved to

be so robust is because firms depend on their governments and

societies for institutional stability. Without governments to

provide for stable rules, labor market policies, systems of law,

and promote investments, there would be no markets. Capitalist

elites recognize this interdependency. Moreover, most capitalist

elites want to try and defend their privileges. This means that

they may like trade if they are "winning", but they do not want

property rights to be part of this.

The purpose of developing this perspective on markets is to

apply it to what has occurred in the EU in the past 30 years. My

basic argument is that Europeanization of the economy has meant a

great deal of pressure for increasing rules to make trade easier

and more transparent, what I will call "rules of exchange".

Indeed, most of the activities of the EU have been of this

variety. I will also present evidence that the EU has by and

large also come to coordinate rules of competition and

cooperation for firms involved in trade across borders. However,

there has been little convergence across Europe in property

rights. While there is some movement in this direction, national

political and economic elites (with the exception of Great

Britain) have held fast to rules to protect their control over

property rights in the largest and most important firms in

society. Therefore, the evidence exists to show that two of the

three conditions for producing single markets exists within

Europe.

I then, turn to considering the degree to which markets have

become integrated over time. I examine cross border trade and

look for how it has changed across society and industrial sector.

My results provide evidence for the view that the European

political project is fundamentally about the degree to which

European markets are integrated. Over time, the share of European

production that ends up in Europe has increased. Indeed, Europe's

"external" trade dependence is relatively low as a percentage of

GDP. Having said this, some European firms are increasingly

spreading their activities overseas. They are mainly investing in

the United States. But, they have been moving some of the

investment to Asia. Perhaps most interesting, the Europeans, who

have traditionally been skeptical about the value of services,

have been extensively purchasing financial and business service

firms abroad at home and abroad.

My main interpretation of the data presented here, is that

the European economic integration project rivals that of the U.S.

Indeed, I will show that Europe is in many ways, as economically

integrated as the U.S. And like the U.S., the largest European

firms are looking to other markets to grow, particularly the

markets of North America. In this way, large European

multinationals are very similar to their American counterparts in

orientation. While national governments remain important to

providing stable conditions for economic growth, they have

increasingly pooled their sovereignty and make collective

decisions in Brussels. National governments also maintain the

bureaucratic apparatus necessary to enforce rules. They also

continue to foster separate systems of property rights.

The picture one obtains is of a European convergence within

markets where goods are heavily traded, but a lack of convergence

in certain markets with little trade. There is also little

evidence in convergence in either labor relations regimes or

property rights. Governments continue to play pivotal roles in

protecting their most organized workers and firms.

What is an integrated market?

To apply the theory of fields to understand market society,

it is necessary to define what kind of fields markets are, and

what types of social organization are necessary for stable

"markets as fields" to exist. The central insight of the

political-cultural approach to economic sociology proposed here,

is that to produce markets as stable fields requires four kinds

of social organization. It is useful to define the terms of my

discussion.
 Economic exchange ranges from infrequent and unstructured to

frequent and structured. Markets are social arenas or fields that

exist for the production and sale of some good or service and

they are characterized by structured exchange. I distinguish

markets as structured because I want to emphasize that they rely

on rules and social structures to guide and organize exchange.

Actors in unstructured or haphazard exchange have little invested

in the exchange and participants may or may not interact again.

While they may benefit from the exchange, their ultimate survival

does not depend on haphazard exchange. It is when the agents in

exchange begin to view their own stability (ie. reproduction) as

contingent on stabilizing trade, that they turn to social

organizational vehicles. Exchange throughout human history has

often been closer to unstructured exchange but, markets in the

way in which I use the term here, have preexisted modern

capitalism.

Markets (and this includes almost all modern production

markets) are mainly structured by sellers looking for buyers.1 A

given market becomes a stable field when the product being

exchanged has legitimacy with customers, and the participants,

particularly the suppliers of the good or service, are able to

produce a status hierarchy whereby the largest dominate the

market. These actors produce organizations to make the good, and

manage to create social relations between competitors that govern

competition. They use these social relations to remain in

existence on a period to period basis.2 Thus, stable markets can

be described as "self reproducing role structures" where

incumbent and challenger firms reproduce their positions on a

period to period basis (White, 1981).

The sellers generally produce the social structure in the

market because their firms' existence is at stake if structured

exchange fails to take hold.3 The social relations between

sellers in a stable market is one whereby one set of firms

produces a dominate frame for the market and the others firms

fall in line. This does not imply that the partners to any given

exchange between buyers and sellers have to be the same actors.

Sellers vie for customers and customers may switch suppliers. The

stability of the sellers, in the sense of their organizational

survival, is what is important to the stability of the market. My

operational definition of a market is the situation where the

status hierarchy, and by implication, the existence of the

leading sellers, is reproduced on a period by period basis.

For example, the steel industry in the United States for

much of the 20th century, was a stable market with persistent

firm identities and defined products. The largest firms

reproduced themselves on a period to period basis by being

vertically integrated and focussing on stabilizing prices even as

demand shifted radically (Fligstein, 1990). Since the mid-1960s,

the identities of the suppliers of steel products have been

transformed. Many of the largest producers disappeared and new

firms began to dominate the market. The market itself became

differentiated between products that were basic commodities and

higher end, higher value added products. The newer firms were

able to take advantage of these changes to form a new market. The

field that once existed has disappeared and two new market fields

have taken its place (Hogan 1984).

I do not mean to obliterate the distinction between a market

and an industry here. A market is a social arena where sellers

and buyers meet. But, for sellers and buyers to exist, a product

has to exist and someone has to produce it. A market depends on

the buyers continuing to "show up" in a particular social space

to purchase the product. But, the sellers' firms and their status

relations define what stability means in the market. They define

what the market is about and their relations define the local

culture by which money is to be made and stability produced.

While there is obviously an interdependency between buyers and

sellers, the sellers' stake in the arena is one of survival.

In spite of elaborate social mechanisms and rules to guide

market interaction, markets are inherently unstable from the

point of view of sellers. One of the deep insights of

neoclassical economics is that market society makes it very

profitable to create new markets. At the beginning of markets,

first movers can often reap huge rewards. But, as other economic

actors realize this, they enter into the market, and prices begin

to drop. Moreover, as markets slow down in growth (as they

inevitably do), firms have incentives to go after more market

share and to begin to cut prices. Products can be delegitimated,

most often by being superseded by other products. It is these

opportunities and problems that create unstable conditions for

producers.

Even where seller relations have been stabilized, it is

possible for them to be upset. The "game" is to find a way to

produce a market as a stable field. These stable markets contain

social structures that specify the relations between dominant,

challenger and seller firms. The social relations are oriented

toward maintaining the advantaged positions of the largest seller

firms in the face of their challengers. They define how the

market works and how competition is structured.

As forms of social organization, market structures involve

both cognitive understandings and concrete social relations. The

cognitive understandings are of two sorts: general societal

understandings about how to organize markets and solve the

problems of stability, and specific understandings about the way

a particular market works. These specific understandings provide

actors with ways to make sense of their competitors' actions.

The concrete social relations in a given market will reflect

the unique history of that market and its dependency on other

markets. These relations will constitute which firms are dominant

and why, and their relations to challenger firms. The ultimate

success of firms in producing stable fields (ie. social

structures to stabilize their relationships with one another), is

dependent on the general principles of making markets in their

society, and the ability to find a way to do this within a

particular market.

The first problem for developing a sociology of markets is

to propose theoretically the kinds of rules and understandings

necessary to making structured exchange (ie. markets as fields)

possible in the first place. There are four types of rules

relevant to producing social structures in markets-- what can be

called property rights, governance structures, rules of exchange,

and conceptions of control.

It is through the existence of these institutions that

actors produce social structures to organize themselves, to

compete and cooperate, and to exchange with one another in a

regular and reproducible fashion. Each of these types of social

structure is directed at different problems of instability. Some

are more related to the general problem of creating a market in

the first place and others have to do with insuring the stability

of firms in a particular market.

Property rights are rules that define who has claims on the
profits of firms (akin to what agency theorists call "residual

claims" on the free cash flow of firms (Jensen and Meckling 1974;

Fama 1980)). This leaves open the issues of the different legal

forms that exist; the relationship between shareholders and

employees, local communities, suppliers, and customers; and the

role of the state in directing investment, owning firms, and

protecting workers. I argue that the constitution of property

rights is a continuous and contestable political process, not the

outcome of an efficient process (for a similar argument, see Roe

1994). Organized groups from business, labor, government

agencies, and political parties will try to affect the

constitution of property rights.

The division of property rights is at the core of market

society. Property rights define who is in control of the

capitalist enterprise and who has rights to claim the surplus.

Property rights do not always have to favor the privileged groups

in society. If, for instance, governments own firms and control

investment decisions, their decisions can take into account

different divisions of profits. Cooperative businesses or

partnerships can allow for equal distribution of profits. Workers

can receive part of their pay in profit sharing schemes.

Property rights are necessary to markets because they define

the social relationships between owners and everyone else in

society. This stabilizes markets by making it clear who is

risking what and who gets the reward, in a particular market

situation. A given firm's suppliers know who is the responsible

entity. Property rights thus function to produce two forms of

stability: defining the power relationships between

constituencies in and around firms, and signalling to other firms

who they are.4

Governance structures refer to the general rules in a

society that define relations of competition, cooperation, and

definitions of how firms should be organized. These rules define

the legal and illegal forms of how firms can control competition.

They take two forms: (1) laws and (2) informal institutional

practices. Laws called antitrust, competition, or anti-cartel

laws, exist in most advanced industrial societies. The passage,

enforcement, and judicial interpretation of these laws is

contested (Fligstein 1990), and the content of such laws varies

widely across societies. Some societies allow extensive

cooperation between competitors particular when foreign trade is

involved, while others tend try to reduce the effects of barriers

to entry and promote competition. Competition is not just

regulated within societies, but across societies. Countries have

tariffs and trade barriers to help national industry to compete

with foreign competitors. These laws often benefit particular

sectors of the economy.

Market societies develop more informal institutional

practices which are embedded in existing organizations as

routines and are available to actors in other organizations. Some

mechanisms of transmission are professional associations,

management consultants, and the exchange of professional managers

(DiMaggio and Powell 1983). These informal practices include how

to arrange a work organization (such as the multidivisional

form), how to write labor and management contracts, and where to

draw the boundaries of the firm. So, for instance, firms can

compete on price, but if firms infringe on one another's patents

or trade secrets, they are likely to run afoul of the law. They

also include current views of what constitutes legal and illegal

behavior of firms. Governance structures help define the legal

and normative rules by which firms structure themselves and their

relations to competitors. In this way, they generally function to

stabilize those relations.

Rules of exchange define who can transact with whom and the
conditions under which transactions are carried out. Rules must

be established regarding shipping, billing, insurance, the

exchange of money (i.e., banks), and the enforcement of

contracts. Rules of exchange also regulate health and safety

standards of products and the standardization of products more

generally. For example, many pharmaceutical products undergo

extensive testing procedures. Health and safety standards help

both buyers and sellers and facilitate exchange between parties

who may have only fleeting interactions. Products produced in one

country often have to meet the safety standards of those products

in another country.

Product standardization has become increasingly important in

the context of rules of exchange, particularly in the

telecommunications and computer industries. There exist extensive

national and international bodies meet to agree on standards for

products across many industries. Standard settings produces

shared rules that guarantee that products will be compatible.

This facilitates exchange by making it more certain that produce

bought and sold will work the way they are intended.

Rules of exchange help stabilize markets by insuring that

exchanges occur under a set of rules that apply to everyone. If

firms who ship their goods across a particular society do not

have rules of exchange, such exchanges will be haphazard at best.

Making these rules has become even more important for trade

across societies. Many of the newest international trade

agreements, including the European Union's Single Market Program

and the last round of GATT, focus on producing and harmonizing

practices around rules of exchange.

The purpose of action in a given market is to create and

maintain stable worlds within and across firms that allow

dominant firms to survive. Conceptions of control refer to both

the understandings that structure perceptions of how a particular
market works and the real relations of domination in the market.

A conception of control is simultaneously a worldview that allows

actors to interpret the actions of others and a reflection of how

the market is structured. Conceptions of control reflect market

specific agreements between actors in firms on principles of

internal organization (ie., forms of hierarchy), tactics for

competition or cooperation (ie. strategies), and the hierarchy or

status ordering of firms in a given market.

A conception of control is a form of "local knowledge"

(Geertz 1983).5 Conceptions of control are historical and

cultural products. They are historically specific to a certain

industry in a certain society. They are cultural in that they

form a set of understandings and practices about how things work

in a particular market setting.

The Integration of European Markets

There are two sorts of market integration projects that this

analysis suggests. First, is the political-legal project that

would produce a single set of rules to govern market activities.

To say that there existed a single market in a geographic area

would imply that there exists a single set of rules to govern

exchange, to regulate competition and cooperation between firms,

and to define property rights. In the real world, there are no

single markets in this way. It may come as a surprise to readers,

but the U.S., which is often held up as a single market does not

have a single set of rules defining property rights and there are
some differences in rules of exchange. These are caused by the

fact the U.S. is a federal system and in the evolution of the

national economy, state governments have kept some jurisdiction

over economic activities within their borders. The U.S., is of

course, more a single market in a geographic sense than an

unintegrated market, but this is a question of degree.

The second way in which markets are integrated concern

exactly who the main market participants are. So, a particular

market may be fragmented geographically or not. It is possible

that markets are integrated in terms of laws and practices, but

that because of which firms are in the markets, they may be in

reality fragmented.

From this perspective, we can begin to examine the degree to

which world markets are integrated. So, for example, some

markets, like high technology weapons, may be highly regulated

and national in orientation. There do not exist rules of

exchange, rules about cooperation and competition, or rules about

property rights. Finally, there will be little direct competition

between firms across societies. Other markets may be highly

integrated. World currency markets operate according to a set of

rules, allow free exchange, and have participants from around the

world. There are generally less international agreements about

competition policy, but even here, there are exceptions. The

World Trade Organization examines world trade practices in order

to discover if societies are creating illegal trade barriers to

keep out foreign competitors in markets where societies have

signed agreements. What appears to be least integrated across

world markets, is the market for property rights.

The case of the EU can be held up to similar standards. In

the next chapter, I will show that Europe now has fairly free

exchange in markets where firms are trying to trade. There also

exists a substantial number of rules governing various forms of

nontariff trade barriers that would effect competition. Rules

about competition policy exist across Europe and apply broadly.

What is least integrated is European property rights regimes. The

only country in western Europe with a market for corporate

control is Great Britain. I will consider this issue in more

depth later in this chapter.

If one accepts for a moment that Europe is a single market

in terms of market access, the ease of engaging in transactions

across national borders, and competition policy, then one can

turn to the degree to which Europe is actually a single market in

practice. This implies examining the data on trade within Europe

and between Europe and the rest of the world over time.

(Table 1 about here)

It is useful to consider world trade more broadly before

turning attention to Europe. Table 1 presents data on the shares

of world trade by region. There are several interesting and

important features in this table. First, western European

countries accounted for between 40.2 and 48.3% of world exports

and 39.6 to 44.8% of world important over the period 1980-1995.

The share of world trade in which European countries were

involved was extremely high and relatively stable over time. If

anything exports are growing, while important are remaining

stable as a share of world output. In this sense, when we talk

about globalization and world trade, about half of what we are

talking about is trade amongst the nations of western Europe.

There are several other important features to note about

this table. First, the developed worlds' share of world exports

(ie. North America, Japan, and Western Europe) was roughly 65% in

1980 and increased to about 71% in 1995. As world trade grew in

real dollar terms, the developed world's share of trade increased

and not decreased. Finally, there was a huge increase in the

shares of imports and exports for nonJapan Asia over the period

as these increased from about 10% to about 18%. The real losers

in world trade over time were the C.I.S., Eastern Europe, and the

rest of the developing world.

Globalization from 1980-1995 thus showed a great deal of

continuity in terms of the relative shares of trade going to the

most developed societies (indeed, their shares were increasing)

and Europe continues to dominate world trade. The real winners

were the developing countries of Asia while the real losers were

the rest of the world.

(Table 2 about here)

Table 2 shows a snapshot of the ultimate destination of

trade in 1993. Exports are divided into three regions: Asia,

Western Europe, and North America. Most of the exports of Western

Europe (almost 70%) end up in Western Europe. 46.5% of Asia's

exports end up in Asia while only 35.6% of North America's

exports end up in North America. Table 1 and table show provide

convincing evidence that world trade in the past 15 years is

greatly centered on western Europe. The countries of western

Europe account for almost half of world trade and about 70% of

that trade ends up in Europe. This is clearly evidence for

Europeanization.

(Table 3 about here)

It is useful to disaggregate these trade patterns to observe

how they break out over product groups. Table 3 provides a

breakdown which isolates the countries of the EU, North America,

and Asia, examines what they trade in, and looks more closely at

the destination of their trade. The bottom panel of the table

examines trade specialization. The EU, which accounts for about

45% of world exports, produces about that share of agricultural

exports and slightly more than its share of manufactured goods.

It produces a great deal less of mineral raw materials and office

and telecommunications equipment. North America (about 16% of

world exports) exports about its share in manufactured goods,

slightly more than its share of agriculture products and office

and telecommunications equipment, and less than its share of

mining. Asia (about 28% of world exports) produces way over its

share of office and telecommunications equipment, slightly under

its share of manufactured goods, and less than its share of

agricultural and mineral products. This table is the clearest

snapshot that captures the rise of high technology production in

Asia.

However, if one begins to examine these data more carefully,

they begin to tell a more subtle story. So, while the Asian

societies dominate world exports for office and telecommunication

equipment, their exports ($193.1 billion) account for less than

5% of world trade in 1993. A large part of that share ends up in

Asia and to a lesser degree the U.S. Europe imported about $42

billion from Asia in 1993, while European trade in office and

telecommunications equipment was $102.1 billion and imports from

the U.S. were $71.2 billion. Thus, even with the high production

of high technology computer products, the EU was producing almost

three times as much equipment in dollar terms, and was importing

almost twice as much from America than Asia.

The most interesting part of the table is caught by

examining the shares of exports of the products that end up with

each region. Very high amounts of European production of

agriculture and minerals end up in Europe. Europeans do export

more manufactured goods although 67.1% still end up in Europe. As

already noted, most of European office and telecommunication

equipment ends up in Europe. Table 3 reinforces the conclusions

in tables 1 and 2. The EU exports dominant shares of manufactured

goods, and agricultural products, and less of mineral products

and office and telecommunications equipment. The EU is the

largest exporter in the world, but most of that export ends up in

Europe.

(Figure 1 about here)

Figure 1 graphically portrays what has happened in European

exporting between 1980 and 1995. Between 20 and 25% of European

GDP was accounted for by exports over the period. Exports started

at the higher end of that range, declined until the early 1990s,

and increased thereafter. The percentage of European GDP

accounted for by exports to other EU countries changed from about

15% to 18% over the period. This change occurred consistently.

Thus, over time, while the percentage of European GDP involved in

exports moved within a relatively narrow band, the percentage of

European GDP accounted for by exports to Europe increased. The

top line of figure three shows the percentage of total exports

due to intra-EU trade. Not surprisingly, this increases from

about 60% in 1980 to a little over 70% in 1995. European

societies were not becoming more trade dependent over the period,

but they were increasingly turning that trade towards the other

members of the EU. This is evidence that the Single Market had

the effect of redirecting European trade to the other countries

of Europe.

(Table 4 about here)

The final table to examine in terms of economic exchange

across Europe considers how these changes in trade worked out

across countries between 1980 and 1995. We see that the U.S.

almost doubled exports as a percentage of GDP over this era,

albeit starting from a low level. Japan's internal economy grew

faster than its exports over the period and so trade as a

percentage of its GDP fell. In Europe, there are two patterns to

note. First, Germany's exports as a percentage of GDP rose and

then fell. By 1995, exports as a percentage of GDP were smaller

than they were in 1980. Second, both France and Italy became more

trade dependent while Great Britain stayed about the same. In

1995, the four largest European economies were all about equally

trade dependent at about having exports as 20% of GDP. Europe's

smaller countries are even more trade dependent. Ireland,

Belgium, the Netherlands, and Luxembourg depend on exports for

over 60% of GDP.

Taken together, these tables imply that the story about

globalization as a description of what is happening to world

trade is too broad. In fact, what has been going on in the world

economy are two main trends: Europeanization, and the growth of

nonJapan Asia. Asian societies have increased their share of

world exports, not at the expense of the developed world, but at

the expense of the less developed world. They have produced huge

exports in office and telecommunications equipment, but remain

less competitive in manufacturing. Europe, continues to be the

largest trade zone in the world with almost half of world trade

occurring across the borders in western Europe. This share has

remained stable over time. What has changed is that European

countries, as a result of the single market, are trading more

with each other, and less with the rest of the world. Taken

together, this is evidence that European markets are continuing

to integrate in the sense that European firms are coming to face

one another more and more in European product markets.

Europeanization and the Strategies of Large Firms

If trade across Europe has grown more dense, it is

interesting to consider exactly what this means for corporations.

One can imagine that firms engaged in export would pursue one of

two strategies as they expand their activities in Europe. First,

they could decide to redistribute their activities across Europe.

This would mean that they would make investment in plant capacity

and buy up firms in other countries. They could do this to lower

the costs of their wage bills or to just be closer to finished

markets. Alternatively, since the single market means that

European firms are theoretically free to ship goods anywhere in

Europe with few barriers, firms could decide to stay at home.

Indeed, as trade barriers decrease and transportation and

communications costs decrease, firms would feel less compelled to

relocate facilities to other societies.

To figure out what large European corporations are doing, it

would be useful to have data on their activities as they change

over time. Unfortunately, data of this sort just does not exist.

So, instead, I will rely on available data and try and examine

more indirect evidence to ascertain if changes are occurring over

time.

The first data I consider come from a study of the world's

largest multinational corporations in 1987 (Stafford and Purkis,

1989). This data set is unique in that it contains information on

the worlds largest 450 multinational corporations. It attempts to

disaggregate where firms have their main investments, assesses

their major markets, and considers their main strategies. This

snapshot of the world's multinationals gives us a great deal of

insight into the organization of the activities of the largest

firms around the world. It also allows us to compare the

activities of European based multinationals to other firms of

similar size and with similar aspirations. Thus, we can see the
degree to which European firms are like or not like the

multinational firms of other societies.

(Table 5 about here)

Table 5 presents data on investment of the world's largest

multinationals broken down by whether or not the firm are

headquartered in the EU or somewhere else. EU firms and non EU

firms have about 60% of their assets invested in their home

countries and about 20% of their additional assets invested in

the rest of Europe, but not their home country. Interestingly,

these totals are not statistically significantly different. Thus,

European multinationals and non European multinationals are

similar in how they have invested at home and in Europe.

But, EU and non EU multinationals differ greatly when it

comes to sales. EU firms sell 20.9% less of their production at

home than do non-EU firms, which is a statistically significant

difference. They also sell about 40% more to their European

counterparts than do the rest of the world's multinationals. This

is also a statistically significant difference. Even more

telling, is the degree to which European large corporations are

concentrated in the European market. EU multinationals, all

together sell on average 70.5% of their production in Europe and

have 75.8% of their assets in Europe.

These results, taken together suggest that EU multinationals

are much more Eurocentric than multinationals in general. They

tend to invest more at home, export more of what they produce,

and export most of their products to the rest of Europe. I note

that the ratio of non European firms sales and investment are
roughly the same at home, and overseas. This suggests that they

have made investments to be close to markets. European firms, on

the other hand, have not made those investments as much and are

more likely to be exporting from their European home. It is no

exaggeration to say that EU multinationals are predominantly

"Europeanized".

(Table 6 about here)

Table 6 expands this analysis by breaking down differences

between European and non European firms into more categories. The

tope of the table considers the strategies of European firms.

Strategy, here, refers to the product mix of firms. Large

corporations, by definition tend to produce a multitude of

products. The link between those products has been the subject of

a great deal of business and economic history (Chandler, 1961;

Fligstein, 1990; Dunning, 1995; Teece, 1987; Gort, 1967; Rumelt,

1970).

There are four major sorts of explanations that exist for

this diversification. Economic explanations tend to focus on

economies of scope. Firms enter in new businesses that are

related to their main business, either to become their own

supplier of some key product, or because the product is naturally

related to products they are already producing. So, a company

making gasoline finds it natural to produce fuel oil, diesel

fuel, and petrochemicals. This allows them to also gain economies

of scale because they can produce larger quantities of common

inputs into outputs.

A second set of explanations centers on the role of

transaction costs in drawing the boundaries of the firm.

Transaction cost analysis suggests that diversification results

from capital market failure. Here, firms discover opportunities

that they can successfully exploit by controlling them

internally. If capital markets were perfect, they would provide

investment into these new arenas. But firms, because of their

asset specificity (ie. investments in new products) are better

able to capitalize on related products than the market which has

a difficult time evaluating the new opportunity. It therefore

invests too little.

A third set of explanations focuses on firms strategies and

the possibility to enter new markets. Here, technology and the

core competencies of the firm are used to discover new markets

either for products that already exist or products that spin off

from existing products.

Finally, firms diversify to spread risk and survive.

Fligstein (1990) shows that diversification took off during the

Depression in the U.S. During this period, firms' found their

existence threatened by lack of sales. They made sales and

marketing a more important function of the firm and realized that

finding new products for existing products or expanding product

lines was a way to insure the survival of the firm. After the

Second World War, the U.S. government aggressively persuade firms

who were dominant in a single product line. This further

encouraged firms to engage in diversification. During the 1950s,

some entrepreneurs discovered that diversification for purely

financial reasons made sense. They began to build acquisitive

conglomerates. Firms were bought and sold on the basis of their

potential growth and the relative cheapness of the assets.

Whichever explanation scholars favor, by the late 1960s, the

largest corporations had diversified their product lines

substantially. The top of table 6 divides product mixes into

three rough categories: product dominant, product related, and

product unrelated. Firms coded as product dominant were producing

over 90% of their product in a single main industry. Firms in

this category were likely to be some metalmaking firms (e.g.

steel, aluminum) or some automakers. Product related implies that

firms are producing products in more than one major industry, and

that the main industry does not account for more than 90% of

production. The products in the two industries need to bear some

relation to each other either by using related technologies,

depending on similar outputs, or serving similar markets. So, oil

companies that were producing oil and chemicals would be in this

category. Most firms producing consumer goods, drug companies,

and even machinery might be in these categories. Conglomerates

were cases where there was no obvious link between products being

produced and no single industry accounted for more than 90% of

production.

While there remains some disagreement over why firms

diversify, it is clear that over the course of the century the

largest corporations have become more diversified in their

product mix. Table 6 shows that EU and non EU firms were

diversified. Almost 20% of both categories of firms were in the

product dominant category. EU firms were slightly more

conglomerate in character than nonEU multinationals. However, the

difference between the two distributions is not statistically

significant. So, at least in terms of product mixes, European and

nonEuropean firms are similarly diversified. This shows a certain

convergence in the strategies of the largest corporations in the

world.

The middle part of the table considers more closely the

degree to which EU firms are more dependent on the nonhome

European market for sales. About 67% of nonEU multinational

depend on Europe for less than 25% of their sales. Almost 60% of

EU firms, depend on the nonhome European market for more than 25%

of their sales. This difference is statistically significant.

The bottom of table 6 shows the number of firms with more

assets than sales at home versus those with fewer assets and

sales at home. Here there is a clear difference between EU and

non EU multinationals. 84.6% of EU multinationals have more

assets than sales at home while 56.2% of other multinationals

have more assets than sales at home. This difference is highly

statistically significant. EU multinationals basically are more

likely to produce at home and ship abroad than non Eu

multinationals.

The snapshot of European versus nonEuropean firms in 1987

shows quite clearly the similarities and differences between EU

and non EU multinationals. Large multinationals tend to be highly

diversified, have about 60% of their investments at home and 40%

abroad, and have about 20% of their sales to the EU (not

including their home country). In these ways, EU and other large

multinationals closely resemble one another. EU multinationals,

however, sell much less of their product at home than other

multinationals and sell much more or their product in Europe than

do other multinationals. The picture this suggests is that

investments are made in the home country for the European market.

They are driven by opportunity, but also the fact that the home

markets are relatively small. European multinationals are more

national, in this sense, and more European than their

counterparts in the population of the largest firms.

Changes in Investment in Europe in the 1990s

The problem with the data just presented, is that it is a

snapshot in time. There have been three events since this data

have been gathered that might make it obsolete. First, firms were

still preparing for the completion of the Single Market during

this period. Their investment patterns may have changed even as

this data was collected. Second, global trade did increase

substantially during the 1990s. I have showed in this chapter

that in the EU this meant more intra-European trade. This

increase in intra-European trade could have effected investment

decisions as well. Finally, at the end of this period, the EU has

gone towards monetary union. The monetary union could also

encourage firms to expand their investment because the

differential costs of factors like land and labor are becoming

more transparent and the transaction costs of doing investments

are lower.
 Unfortunately, there currently exists no data replicating

the Stafford and Purkis study. But it is possible to construct

data on cross border mergers and investments in order to

ascertain what European firms were doing since 1987. To sum up

what I will try to show, the data show mostly continuity, but

there does appear to be some changing in the amount and number of

cross border investments and mergers. Generally, firms continue

to mostly invest at home. They are also more likely to engage in

mergers with firms at home. When they decide to enter markets

across borders, they most frequently do so through a joint

venture with other firms. This suggests continuity with the 1987

data.

The main changes appear to be by the link between the U.S.

market and the European market. Many European firms have entered

into mergers with firms from the U.S. They have taken advantage

of the existence of the U.S. market for corporate control to buy

up U.S. firms. Many European firms also are involved in joint

ventures with American firms in Europe. There is thus, some

evidence that European firms are becoming more global in the

sense that they are acquiring a larger presence in the U.S.

market place. Finally, there is evidence that Europeans do little

investment in Asia and that their trade and investment with Japan

is very low. To the degree that there has been any change, and

here, it is difficult to judge, U.S. and European firms are

drawing closer together and Asian and Japanese firms are less

involved.

(Table 7 about here)

 Table 7 breaks these patterns out by the main country of

origin. British firms depend on Europe for their export markets

about half as much as German or French firms. These numbers

suggest why the British government is less European focussed than

continental European governments. Still, British firms depend on

Europe for almost two-thirds of thei sales while French and

German firms depend on Europe for almost 80% of ther sales. It is

also worth noting that the Japanese challenge in Europe has been

very small. Japanese multinationals average less than 10% of

their sales to Europe

Table 8 presents data on ivestment flows towards and out of

the EU. The top of the table shows that in the run up to the

Single Market, firms from the EFTA countries invested heavily in

the EU. This began to drop off by 1992 and the U.S. assumed its

traditional role as the main investor in Europe. Japan increased

its share of investment in Europe in the period of the single

market, but this tailed off at the end of the period as well.

(Table 8 about here)

The bottom of table 8 shows where firms in EU countries were

investing during the run up to the single market. It is clear

that EU companies were not investing in the EFTA countries. They

were heavily investing in the U.S. through most of the period,

particularly during the merger movement of the 1980s. There was

almost no European investment in Japan. There was an increasing

percentage of investment in the rest of the world. A fair amount

of this investment was in Australia, Canada, and other countries

with natural resources.

(Table 9 about here)

Table 9 tries to get a the question as to whether or not

European firms were primarily investing in other European

societies or elsewhere. In 1993, about 60% of EU cross border

investment was in the EU, while about 40% was somewhere else.

Outside investment in the EU equalled the flow of investment

outside the EU (both were about 21 billion ecus). This data is

difficult to interpret for two reasons. First, it is only one

year of data. Investment flows are notoriously unstable. Second,

without knowing how much investment was made in the home country

by firms, it is difficult to tell if this is a lot of foreign

investment or a little. Still European firms when investing

aborad were investing mostly in Europe.

Another way to get a handle on whether or not the investment

strategies of European firms shifted over this period is to study

cross border mergers and joint ventures. Mergers suggest the

degree to which firms are adding capacity across borders. It is

important to not just consider intra-EU mergers, but also mergers

across societies. The existence of joint ventures suggest a more

modest form of inter-country cooperation. Here firms decide to

enter for a given market by jointly producing or marketing

products. Conclusions must be taken cautiously. As with much of

the data, these data are fragmented and somewhat incomplete.

(Figure 3 about here)

Figure 3 presents data on the number of mergers and joint

ventures that the 1000 largest European firms engaged in on a

year to year basis from 1982 to 1992. The table clearly reveals

the influence on the single market on mergers and to a lesser

degree joint ventures. The largest European firms increased their

merger activity between 1984 (the announcement of the single

market) and 1990). Merger activity peaked in 1989 and fell off

afterwards. Joint ventures follow a similar pattern and peak in

1989 as well.

(Figure 4 about here)

Figure 4 presents data on who the country of origin of the

merger targets. At the beginning of the merger wave 60-70% of the

mergers were within national borders. But as the merger wave grew

and peaked in 21989, cross border mergers increased. In 1989, the

peak year of merger activity, EU mergers made up a slightly

higher percentage of all merger activity of the 1000 largest EU

firms. After 1989, however, national mergers became prominent

once again and EU mergers dropped off. The number of mergers with

non-EU firms fluctuated over the period. This table shows that it

decreased after 1982, picked up after 1984 and peaked in 1990.

Still even at its peak, the largest European firms were engaged

in almost 80% of their mergers with other European firms. This

table presents clear evidence that the run up to the single

market increased cross border merger activity. But, national

mergers predominated through most of the period. There is thus

evidence for the reinforcement of national firm identities and at

least some Europeanization of some firms.

(Figure 5 about here)

Figure 5 considers the changes in joint ventures for

European firms over the same period. At the start of the period,

most European firms were engaging in joint ventures with firms

from their society, although there was a substantial amount of

cross border joint ventures and joint ventures with nonEU firms.

By the time the single market project was done in 1992, the

pattern of joint ventures had changed dramatically. Joint

ventures with EU firms were the highest category, followed by

joint ventures with home country firms, and nonEU firms. Roughly

one-third of the new joint ventures in Europe were in each

category by the end of the period. The most dramatic increase was

in joint ventures with nonEU firms. Clearly, in the run up to the

single market, nonEU firms decided they needed to partner with EU

firms in order to not be shut out of the single market. EU firms

that were reticent to enter other EU markets through direct

investment or acquisition found joint ventures to be attractive.

These two figures suggest that the single market intensified

the European character of the largest firms. They conducted more

cross border mergers and engaged in more joint ventures with both

European and nonEU firms. However, EU firms still conduct most of

their mergers with home country firms. This historical pattern

has reasserted itself in the 1990s. The largest European firms

prepared themselves for the single market by getting more

presence in other European countries either by merging for market

share at home or abroad. They also engaged in more joint ventures

with both EU and non EU firms. Their propensity to favor merger

with home country firms and joint ventures with EU or nonEU firms

implies a preservation in the national character of the largest

firms.

Conclusion

The European Union is the largest trading zone in the world.

It accounts for nearly half of world trade. Astoundingly, almost

70% of that total originates and ends up in the EU. As of 1992,

Eurostat, the agency in charge of collating statistics for the

European Union started to describe this internal trade as the

internal market. They began to consider only trade outside of the

EU as foriegn trade. This clearly is a somewhat symbolic gesture,

but it captures a real truth. Europe is a kind of single market.

This can be juxtaposed to the jarring realization that

governments continue to see themselves as soveriegn states and

the people of the nations of Europe do not consider these facts

to be consequential.

How can this be? I would argue that one of the main reasons

is thoat most economic activity within Europe still takes place

within national borders. But equally important, European firms

continue to have primarily national identities. They continue to

be owned predominantly by people from a single society. As I have

shown, the largest Eureopean corporations do most of their

business in Europe. They also locate more of their productive

activities in their home country than do multinationals from

around the world. Thus, while they are big European traders, they

are also firmly wedded to national governments and labor markets.

The single market and the increases in trade have altered

this picture a bit. It is clear that large European firms in the

run up to the single market engaged in more cross border mergers

than they had previously done. But, it is also clear that even

these firms primarily engage in mergers with firms from their own

society. After 1992, firms reverted to primarily engaging not in

cross border mergers, but in national mergers. The largest firms,

when they went cross border tended to take partners in joint

ventures. They just maintained their natuional firm, while

engaging in joint production with firms from other societies.

Lastly, there is evidence that firms from other societies also

increasingly invested in Europe from 1984-1992. Mainly U.S. firms

engaged in both mergers but mostly joint ventures or direct

foriegn investment to prepared themselves to com,pete in the

single market.

So, the Single Market and the Euro are now economic facts

that push forward Europeanization on a market by market basis.

Yet, in spite of these integration projects, the largest European

firms remain national in orientation and production. If one

considers smaller firms, this becomes even more true. Their

productive activities are even more concentrated at home and

their sales in the rest of Europe do not require them to expand

abroad.
Table 1: Percentage of world merchandise exports by region, 1980,

1985, 1990, 1995

1980 1985 1990 1995

North America
Exports 14.4 16.0 15.4 15.9
Imports 15.5 21.7 18.4 18.7

Latin America
(with Mexico)
Exports 5.4 5.6 4.3 4.6
Imports 5.9 4.2 3.6 4.9

Western Europe
Exports 40.2 40.1 48.3 44.8
Imports 44.8 39.6 44.7 43.5

Eastern Europe
(with C.I.S)
Exports 7.8 8.1 3.1 3.1
Imports 7.5 7.4 3.3 2.9

Africa
Exports 5.9 4.2 3.0 2.1
Imports 4.7 3.5 2.7 2.4

Middle East
Exports 10.6 5.3 4.0 2.9
Imports 5.0 4.5 2.8 2.6

Japan
Exports 6.4 9.1 8.5 9.1
Imports 6.8 6.5 6.8 6.7

Asia
Exports 9.2 11.7 13.3 17.5
Imports 9.9 12.3 14.5 18.3

Source: World Trade Association Annual Report, 1995, table III.1,

III.2.
Table 2: Regional structure of world merchandise trade in
exports, 1993; percentage of regional exports shipped to each
region

Destination of Trade

North Western Asia Rest of Total

America Europe World

Origins of
Trade

North America 35.6 20.2 25.0 19.2 100.0

Western Europe 8.0 68.9 8.8 14.3 100.0

Asia 26.4 17.0 46.5 14.2 100.0

Source: World Trade Organization Annual Report (1996), table

II.1.
Table 3: Network of exports by region and product, 1993

Destinations

Total EU North Asia Rest of

in Billion $ America World

Origin

World 3641.0 42.7 19.4 22.8 15.1

Agric 437.8 47.7 11.9 23.4 17.0

(12.0%)
Mining 433.0 40.1 18.1 30.2 11.6
(11.9%)
Manu 2288.9 43.9 20.0 20.7 15.3
(62.8%)
Office/ 379.4 36.4 27.3 27.8 8.5
Telecom
Equip. (10.4%)

EU
Agric 196.7 76.7 4.2 5.0 14.1
Mining 110.6 78.4 8.4 4.0 9.2
Manuf 1162.7 67.1 8.7 9.9 14.3
Office/ 102.1 71.4 9.8 9.3 9.5
Telecom.
Equip.

North America
Agric 85.6 16.2 25.6 37.7 20.5
Mining 43.2 15.0 51.6 21.9 11.5
Manu 371.3 19.0 43.4 21.0 16.3
Office/ 71.2 27.2 23.6 35.8 13.1
Telecom.
Equip.

Asia
Agric 83.5 15.6 11.6 61.0 21.8
Mining 69.8 6.7 4.6 83.2 5.5
Manug 589.1 18.0 28.0 44.1 9.9
Office/ 193.1 21.6 37.0 36.0 5.4
Telecom.
Equip.

% of World Exports
Agric 44.9 19.5 19.1 16.5
Mining 25.5 9.9 16.1 49.5
Manu 50.8 16.2 25.9 7.1
Office/ 26.7 19.3 50.8 3.2
Telecom. Equip.

Source: World Trade Organization Annual Report, Table A.7.

Table 4: Exports as a percentage of GNP for selected advanced
industrial countries, 1970, 1980, 1985, 1990, 1995

Country 1970 1980 1985 1990 1995

United States 4.2 7.9 5.1 6.7 8.0

Germany 18.5 23.6 29.4 25.9 21.0

Japan 9.5 12.2 13.1 9.8 8.6

France 12.4 16.7 18.5 17.5 18.5

Italy 12.3 17.4 18.5 15.5 21.2

United Kingdom 15.5 21.2 21.9 18.8 21.8

Canada 19.0 23.8 24.5 20.8 33.5

OECD Average 17.7 22.8 26.0 23.3 23.1

Source: Foreign Trade by Commodities, OECD (Paris, 1994), table

4.1. Economic Survey, OECD (Paris, 1996).
Table 5: Comparison of the world's largest mutlinationals in 1987
(Source: D. Stafford and R. Purkis, Directory of Multinationals
, London: MacMillan Press, 1989).

EU Firms Non EU T-test

Firms Significance

Percentage of 59.6 63.2 n.s.

Assets in
Home Country (119) (196)

Percentage of
Assets in Europe, 19.0 17.3 n.s.
Not Home (95) (143)
Country

Percentage of 43.3 64.2 .000

Sales in (138) (204)
Home Country

Percentage of Sales 30.1 21.6 .000

In Europe, Not (120) (150)
Home Country

Percentage of assets 75.8 17.3 .000

In Europe, total (95) (143)

Percentage of sales 70.5 21.6 .000

In Europe, total (120) (150)

Number of cases reported in parentheses; Significance level

refers to the t-test between the means; Data is based on numbers
provided by Stafford and Purkis.
Table 6: Differences in Strategy, EU sales, and Assets/Sales at
Home ratios for large multinational companies, 1987 (Source: D.
Stafford and R. Purkis, Directory of Multinationals, London:
MacMillan Press, 1989).

EU Firms Non EU Firms

Strategy in
Percentages

Dominant 19.9 20.7

Related 54.5 58.5
Unrelated 25.6 20.7

N of Cases 156 294

Chi square=1.4, 2 d.f., significance level= .493

Percentage of firms
with various levels
of EU Sales

0-25 Percent 42.9 66.9

25-50 Percent 43.7 29.0
50 plus Percent 13.4 4.1

N of Cases 119 145

Chi square=17.5, 2 d.f., significance level=.000

Percentage of
Firms with More 84.6 56.2
Assets than
Sales at Home

Percentage of Firms
with fewer Assets than 15.4 43.8
Sales at Home

N of Cases 117 194

Chi-square=48.6, 1 d.f., significance level=.000

Strategy coded as: Dominant: Firms main products account for 90%
of sales; Related: firms products are related by virtue of common
inputs or products; Unrelated: Firms produce substantial products
(more than 10%) unrelated to main products.
Table 7: Comparison of the world's largest multinationals broken
down by country of origin, 1987 (Source: Stafford and Purkis).

Country % Sales % Sales % Assets % Assets Number of

home Europe home Europe Cases
country country

U.S. 69.4 20.4 64.6 16.9 156

Germany 44.2 34.9 56.6 17.6 24

Great
Britain 47.2 17.2 56.6 10.7 59

France 49.4 33.3 64.6 20.2 17

Rest of
Europe 26.7 33.3 53.3 29.7 47

Japan 51.7 17.8 85.0 4.0 14

Rest of 57.4 16.6 57.3 13.8 24

World

Total 55.4 25.4 61.2 18.0 342

Table 7, continued.

Country Total % Total %

Sales Europe Assets Europe

U.S. 20.4 16.9

Germany 78.1 88.3

Great
Britain 66.4 67.2

France 84.9 84.7

Other
Europe 72.1 83.1

Japan 17.8 4.0

Rest of
World 16.7 13.8
Table 7: Foreign Direct Investment EU per year, 1984-1993

Source of Investment in EU (by percentage)

Country/Region
1984 1985 1986 1987 1988 1989 1990 1991 1992 1993

EFTA
27 32 46 30 47 30 34 33 18 17

U.S. 48 31 37 18 14 35 28 26 52 43

Japan 6 13 7 12 14 16 17 8 8 8

Other 19 24 10 40 25 19 21 33 23 32

EU Investment Abroad (by percentage)

Country/Region
1984 1985 1986 1987 1988 1989 1990 1991 1992 1993

EFTA 5 5 -1 6 8 6 16 9 15 18
U.S. 66 67 81 78 70 72 35 35 37 47

Japan 2 0 0 0 1 2 4 1 2 -5
Other 27 28 19 16 21 20 45 55 45 40

Source: Eurostat, 1994.

Table 8: Direct Foriegn Investment in the EU in 1993.

Billion ECU Percentage

of EU Investment
in EU

EU Investment 30.8 59.5

in EU

EU Investment 21.8 40.5

outside of EU

Outside Investment 21.0

in EU

Total 73.6

Source: Eurostat, 1994.

Table 9: Cross border mergers , totals 1989-1996 ($ Billions)

Sales

Region/Country Year

1989 1990 1991 1992 1993 1994 1995 1996

World 123.6 160.0 85.3 121.9 162.4 196.4 237.2 274.6

EU 49.7 60.3 38.7 56.9 51.7 58.4 74.8 76.8

North
America 67.8 60.1 26.1 19.2 40.3 62.9 74.1 81.41

Total US
Mergers 222.1 108.2 71.2 96.7 176.4 226.7 356.0 495.0
(%) (31%) (56%) (37%)(20%)(23%) (28%) (21%) (17%)

Rest of Developed World

4.2 25.5 9.8 23.7 21.7 15.1 35.6 33.0

Developing Countries
1.9 18.2 10.7 32.1 48.7 70.0 52.7 83.4

Purchases

Region/Country
Year
1989 1990 1991 1992 1993 1994 1995 1996

World 123.6 160.0 85.3 121.9 162.4 196.4 237.2 274.6

EU 61.7 90.7 50.5 50.0 74.8 75.3 98.7 114.3

North America
27.1 26.2 15.7 26.4 44.7 52.1 80.4 87.5

Rest of Developed World

21.7 28.5 10.4 17.6 13.2 18.3 23.6 21.8
Developing Countries
4.8 7.5 5.2 22.3 26.9 32.4 24.5 32.8

Souce: Annex Table B.7-8. World Investment Report. United

Nations. 1997
Table 10: Percentage of cross border world mergers by region and
ratio of purchases to sales, 1989-1996
(Source: see table 5)
Sales

Region/Country
Year
1989 1990 1991 1992 1993 1994 1995 1996

EU 40 38 45 47 32 30 32 28
North America
55 38 31 16 25 32 31 30
Rest of Developed World
3 16 11 19 13 8 15 12
Developing Countries
2 11 13 17 30 36 22 30

Purchases

Region/Country
Year
1989 1990 1991 1992 1993 1994 1995 1996

EU 50 57 59 41 46 38 42 42
North America
22 16 18 22 28 27 34 25
Rest of Developed World
18 18 12 14 8 9 10 8
Developing Countries
4 5 6 18 17 16 10 12

Ratio of purchases to sales

Region/Country
Year
1989 1990 1991 1992 1993 1994 1995 1996

EU 1.24 1.50 1.30 .88 1.45 1.29 1.32 1.49

North America
.40 .44 .60 1.38 1.11 .83 1.09 .83
Rest of Developed World
5.17 1.12 1.06 .74 .61 1.21 .66 .66
Developing Countries
2.53 .41 .49 1.06 .55 .46 .46 .39

Source: Annex Table B.7-8. World Investment Report. United

Nations. 1997
Bibliography

J. Dunning. 1985. Multinational Enterprises, Economic Structures

and International Competitiveness. New York: Wiley.

R. Van Tulder and G. June. 1988. European Mulitnationals in Core

Technologies. New York: Wiley.

OECD. 1996. Globalization of Industry: Overview and Sector

Reports. Paris: OECD lip 338 .88 org

D.C. Stafford and R.H.A. Purkis. 1989. MacMillan Directory of

Multinationals (2 volumes). New York: MacMllan
1. The idea of a market as a field does not assume that all
market actors are in physical proximity, only social proximity.
In modern society, trade shows, stock exchanges, commodity
exchanges, shopping malls, shops in general are locales for
physical markets. But, markets do not necessarily have to be
located in physical space. Many sales are made directly between
buyer and seller often through sales people. But in these
situations, buyers often compare prices of sellers by talking to
multiple suppliers.

2. This model, with a little modification can be applied to labor

markets as well where some workers are organized and others are
not.

3. Sellers can greatly affect the stability of market structures.

If sellers stop buying a certain good, then the social
organization of the market will do the producers no good. If
markets are totally dependent on a single seller, then that
seller can dictate market structure as well. But generally, even
in these situations, sellers will frame their actions vis a vis
one another in order to promote the survival of their firm
(White, 1981).

4. Institutional economics has recognized the importance of

property rights for market stability (Jensen and Meckling, 1974;
Fama and Jensen, 1980a; b; Williamson, 1985; North, 1990). The
division of property rights makes the firm possible in the first
place, allows investment to occur, and constrains and enables
managers and workers. In places where firm property rights do not
exist, investment is haphazard and the economy is operated at the
point of the barrel of a gun.

5. I will discuss the dynamics of particular markets and the

formation of conceptions of control in a later chapter.