Problems Associated with the Growth of International Firms

Abstract

The term “international firm” is used in this paper to describe a business organization that is engaged in production in a number of countries through branches, subsidiaries, or affiliates, which may or may not be separate corporate entities in the several countries in which they operate. The term “organization” implies that the entire group, including the head office as well as the various types of subsidiary units,* 1 is operated within an administrative framework which knits the whole together in such a way that the general policies and administrative and financial procedures of the group are reasonably consistent and coherent throughout the firm. Individual subsidiaries may have considerable autonomy in their own operations, but if they operate entirely independently of the group as a whole they are better treated from the point of view of the growth of the firm as a simple investment by the parent companies and an extension of its financial influence than as an integral part of the industrial organization, or “firm”.2 It should be clear, therefore, that we shall not be concerned with financial firms nor with firms that merely import and export; we are concerned with firms that engage in production in a number of countries and whose activities are organized within a coherent administrative framework.