U.S. Manufacturing Investments in Western Europe: Markets, Corporate Strategy, and the Competitive Environment

This paper reports on research into the locational strategies of a group of American high-technology firms in the Western European market. The objective is to gain insight into why U.S. multinational firms continue to be committed to a strategy of manufacturing in the Western European market (principally the European Economic Community) despite labor costs and labor market rigidities that are relatively high by global standards. For those firms with local production, major motivating factors included market access and improved supplier performance and service. The latter is concerned with the construction of business relationships and the establishment of a market presence.'’In all cases, the level and nature of competition in the market is a crucial contextual variable. It is proposed that the widely accepted oligopolistic/ownership advantages model of foreign direct investment requires a more dynamic geographical and historical orientation to better explain current tendencies in international manufacturing investments.