Research on foreign ownership in Norwegian industry

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• Research on foreign ownership in Norwegian
  industry

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Stock of foreign direct investments (FDI) in
Norway, 1992-2002 (Norges Bank)
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• The main motive behind foreign establishments in
  Norway is market access
• Mergers and acquisitions are the most common
  establishment strategies
• Foreign ownership is most common in the oil
  sector and in services (trade, finance,
  insurance)
• While FDI in industry is limited in relative
  terms, approximately 1/3 of the share capital in
  listed manufacturing firms is foreign owned

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Foreign ownership in Norwegian industry, Gabriel
R. G. Benito (1996)
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• Poses the question of whether it matters if a
  firm is foreign owned or Norwegian owned - and if
  so, how
• Discussion based on existing litterature
• Starting point substantial disagreement in the
  public debate on the role foreign ownership has
  and should have in Norwegian industry

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• Generally few studies of FDI in Norway
• Previous studies include
• (1) Stonehill (1965) foreign owned firms were
  generally larger and more efficient than
  Norwegian owned firms
• (2) Maktutredningen (1982), Midttun, Noreng and
  Nygaard (1987) foreign owned firms were not more
  profitable than Norwegian owned firms within the
  same brances of industry
• (3) Simpson (1994) foreign owned firms were
  larger and more efficient
• (4) Kvinge (1994) close-downs were more
  frequent for Norwegian owned firms than for
  foreign owned, and the latter showed a more
  positive development with regards to employment
• Indicate that FDI in Norway have been beneficial
  to the national industry in many respects

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• Ownership matters, but should be assessed
  according to other crititeria than nationality

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• Study of national and regional effects of
  foreign ownership in Norwegian industry by the
  Foundation for Research in Economics and Business
  Administration (1999)

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Main findings

• Whether a company is Norwegian or foreign owned
  do not appear to be of particular importance to
  the number of linkages to the surrounding region
• Regional effects are dependent upon the status
  the Norwegian subsidiary has in the multinational
  as a whole - the more strategic responsibilities
  the subsidiary had, the stronger were the links
  to the surrounding region
• The majority of the firms purchased goods and
  services locally, but the extent varied
• Staff was recruited locally from competing firms,
  institutions of higher education, college
  training schemes, employment companies, and
  through internal recruitment
• 19 of 21 of the subsidiaries were involved in RD
  activities - either in-house or through Norwegian
  RD institutions

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• The report recommends that there is established a
  network of regional offices that offers
  information and other services to foreign firms
  that invest/are interested in investing in
  Norwegian industry

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• Industrial clusters and foreign companies
  centres of excellence in Norway, Gabriel R.G.
  Benito (2000)

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Starting point

• (1) The general acknowledgement that the effects
  of foreign ownership on local industry depend on
  the role and responsibilities assigned to the
  subsidiary
• (2) That while earlier research on MNEs tended to
  view them as traditional unitary firms in which
  the parent company constituted the centre and the
  foreign subsidiaries the periphery, it is now
  increasingly recognized that subsidiaries have
  widely different roles and that
• (3) Some subsidiaries become centres of
  excellence, by which is meant that they control
  resources on which other parts of the MNE depend
  for their operation, and thus hold a strategic
  position in the corporation

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Main question

• To what extent have centres of excellence been
  established in Norway by foreign MNEs?

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Findings and conclusion

• While only a minority of foreign owned units in
  Norway could be given the status of centres of
  excellence, such CoEs seemed to be more than
  just a rarity
• Depending on the criteria, their number ranged
  from 28 to 221
• CoEs appeared to be unevenly distributed across
  industries
• the Norwegian subsidiaries of foreign MNEs have
  considerably varying roles, which in turn
  elucidates the importance of not only what sort
  of FDI a country is able to attract, but also of
  the subsequent development of subsidiary roles

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Study on environmental influences of MNE
subsidiary roles, by Benito, Grøgaard and Narula
(2003)
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• Examines the importance of environmental factors
  in determining MNE subsidiary roles in the Nordic
  countries
• Subsidiary roles are assessed in terms of scope
  of activities and competence level
• Particular focus upon one specific environmental
  factor EU membership
• Based on a large-scale survey of foreign owned
  units in three Nordic countries Denmark, Finland
  and Norway of which the two former are EU
  members and the latter not

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Findings and conclusion

• Subsidiaries in Norway scored significantly lower
  in terms of both scope of activities and
  competence level than those in Denmark and
  Finland
• This finding held true even when controlled for
  other potentially influential factors
• Thus membership of an integration scheme such as
  the EU plays a significant role in determining
  subsidiary roles - the reason being that such
  schemes require economic convergence,
  establishment of common institutions and
  synchronized policy framworks

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• Studies of the effects of globalisation on
  innovativeness, competitiveness and grotwh of
  firms and regions, the TIK Centre at the
  University of Oslo
• the effects of foreign ownership is to a large
  extent determined by the structural
  characteristics of the business system in the
  foreign owners home country