The evolution of foreign subsidiaries and employment: the case of German direct foreign investment into North West England

Heise, Arne, McDonald, Frank and Tüselmann, Heinz (2000) The evolution of foreign subsidiaries and employment: the case of German direct foreign investment into North West England. In: Manchester Metropolitan University Business School Working Papers. Working Paper. Manchester Metropolitan University. ISSN 1471-857X

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Abstract

This paper investigates the evolution of foreign subsidiaries in promoting employment in their host regions. The implications for employment are considered using a theoretical frameworks on how Multinational Corporations (MNCs) develop their network of subsidiaries. The theoretical framework suggests that (when parent companies are based in economies with similar levels of development as the host economy) the development of subsidiaries should follow a time path beginning with export enhancing investments that diversify into more complex operations. An analysis is then made on how this would affect employment. The theoretical framework is assessed using evidence from a survey of German subsidiaries in North West England. The survey suggest that German MNCs may not be providing the expected benefits that are sought from the large increase in Direct Foreign Investment (DFI) flows that have followed from the integration programmes of the European Union (EU). The results of the survey are reinforced by evidence from other research work, which suggests that European MNCs are less likely than non- European to create diversified networks of subsidiaries within the EU. Some policy implications and a future research agenda are drawn from the results.