Geography Reference
In-Depth Information
domestic economy relative to those abroad is another major difference. In
1914 the US was by far the largest recipient of world FDI, as its potential
for internally-generated profits was the largest in absolute terms. This was
also mirrored by the fact that large US companies had always much larger
shares of their business operations at home than outside the national
boundaries; whereas this was not the case for some of the small (and some-
times even of the larger) European headquartered companies (Wilkins
1998). National and regional (i.e. sub-national: Wilkins 1998, pp. 10‒11)
education and scientific training systems were also at the core of compa-
nies' strengths in expanding abroad, as well as, as highlighted before, the
financial and banking system. For example, the strong and overarching
presence of German banks in economic activities extended and supported
business operations far beyond the domestic sphere, thereby playing a key
role in the evolution of German MNEs in the first decades of the twenty
century. Likewise, large banks had a crucial influence on the internation-
alization of both French and Belgian companies (Wilkins 1998).
In marked contrast to the experience of manufacturing industries, early
multinational developments within the financial service sectors were in
general much smaller and very different in nature to those of the manu-
facturing sector. From the early part of the eighteenth century onwards,
London had been the centre of global finance, serving markets all over the
British Empire, as well as markets in both North and South America. The
worldwide developments in the manufacturing industries were to some
extent mirrored in the financial industries, and obvious examples of these
developments were the merchant banks, whose roles in global engagement
expanded rapidly from the late nineteenth century onwards. As such,
the rise of British and American merchant banks, such as Rothschild,
Barings and JP Morgan, started to transform capitalism from what
had been primarily a mercantilist and colonial system into a genuinely
global market-based system transcending the individual national colonial
systems (Ferguson 2008). Yet, on the eve of the Second World War, the
UK and other European financial systems were still more or less closed to
external influences, with almost no foreign ownership of their domestic
financial institutions. The tight regulatory systems for domestic financial
services evident in the UK and the US were the norm for all countries prior
to the Second World War, and the closed nature of many of these systems
was strengthened in the immediate post-war era with the Bretton-Woods
architecture. As such, the relatively closed nature of the domestic financial
sector meant that, while the London markets were used to raising finance
for many global investment opportunities, the effects of the globalization
process itself on the behaviour and governance of the British financial
services sector was still very limited until well after the Second World
