Foreign direct investment and competition in the advertising sector : the Italian case

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W ORKING

PAPERS

E U I W O R K I N G P A P E R No. 8 9 / 4 1 7

F o r e ig n D ir e c t In v e s tm e n t a n d C o m p e t it io n in th e A d v e r tis in g S ector: T h e I t a lia n C a se

JOSE P. ESPERANCA NEIL KAY 0 © The Author(s). European University Institute. version produced by the EUI Library in 2020. Available Open Access on Cadmus, European University Institute Research

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E U I W O R K I N G P A P E R No. 8 9 / 4 1 7

F o r e ig n D ir e c t I n v e s t m e n t an d C o m p e titio n in th e A d v e r tis in g S e c to r : T h e Ita lia n C a se

JOSE P. ESPERAN£A*

(E.U.I.)

NEIL KAY

(Strathclyde University Glasgow)

Revised in November 1989

*1 acknowledge the support given by the "Instituto Nacional de

Investiga$ao Cientifica", Lisboa.

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No part of this paper may be reproduced in any form

without permission of the authors.

© José P. Esperança

Neil Kay

Printed in Italy in November 1989

European University Institute

Badia Fiesolana

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A B S T R A C T

This paper is c o n c e r n e d wi th the c o m p e t i t i v e a d v a n t a g e s that m u l t i n a t i o n a l ad ve r t i s e r s can o b ta in in f o r e i g n ma rk et s. W e exam e di ff e r e n c e s b e t w e e n two types of a d v e r t i s i n g c u s tomers, local firms a n d a f fi li at es of m u l t i n a t i o n a l s . T h e a n a l y s i s of the It alian a d v e rt is in g sector c o n f i r m s the s u p e r i o r i t y of A m e r i c a n a d v e r t i s i n g m u l t i n a t i o n a l s in s e r v i c ing A m e r i c a n clients, a n d shows a less strong a l b e i t s i g n i f i c a n t re la ti o n s h i p for E u r o pe an firms. However, it al so re ve al s the import an ce of co un tr y s p e c if ic f a ct or s that c o u n t e r a c t the c o m p e t i t i v e ad va n t a g e s of m u l t i n a t i o n a l a d v e r t i se rs v e rs us local clients.

* A p r e l i m i n a r y v e r s i o n w a s p r e s e n t e d at the 15 th E A R I E C o n f e r e n c e in Rotterdam, 1988. This pape r has b e n e f i t e d from c o m m e n t s m a d e by p a r t i c i p a n t s a n d important s u g g e s t i o n s g i v e n by P r o f e s s o r s Mark C a s s o n and S t ep he n Ma rtin, at the EUI. U s u a l ca ve at s apply. © The Author(s). European University Institute. version produced by the EUI Library in 2020. Available Open Access on Cadmus, European University Institute

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In tr od u c t i o n

The ev o l u t i o n of m u l t i n a t i o n a l e n te rp ri se (MNE) has be en the su bject of m u c h pu bl ic d e ba te in recent years. Its i n cr ea si ng si gn if i c a n c e in g l ob al e c o n o m i c a c t i v i t y has a t t r a c t e d c o n s i d e r a b l e interest a n d g e n e r a t e d m u c h c o nt ro ve rs y. Recently, a number of st udies have shed new light on the n a t u r e and be ha vi ou r of M N E ' s . 1

A l t h o u g h the a n al ys is of M N E s in some s e ct or s has m a t u r e d consid er ab ly , other sectors, in cl ud in g the s e rv ic e sector, ha ve been neglected. To some extent, this is the re su lt of the e m p h as is p l ac ed in the l i te ra tu re on the ce nt ra l role of R & D in ex pl an a t i o n s of the ev o l u t i o n of the h o r i z o n t a l l y in te gr at ed MNE. R & D ec on o m i e s are p e r h a p s the m o s t o b vi ou s s o ur ce of e f f i c i e n c y gain s f r o m i n t e r n a l i s a t i o n of e c o n o m i c activity. For this reason, m u c h of the a n a l y s i s has u n d e r s t a n d a b l y co nc en t r a t e d on the i n t e r n a l i s a t i o n of m a n u f a c t u r i n g activity. Pr ob le ms of a p p r o p r i a b i l i t y of c o m p e t i t i v e a d v a n t a g e in R & D kn ow ho w have led to the in t e r n a l i s a t i o n of e c o n om ic a c t i v i t i e s in m a n y h i g h t e c h n o l o g y sectors, in the form of MNE, in order to p r o t e c t v u l n e r a b l e an d s e ns it iv e firm s p e c if ic knowle dg e. T h e

1. See, for example, C a s s o n (1987 and 1988), C a v e s (1982), D u n n i n g (1987), G a l b r a i t h and Kay (1986), He n n a r t (1986), T e e c e (1986). © The Author(s). European University Institute. version produced by the EUI Library in 2020. Available Open Access on Cadmus, European University Institute Research Repository.

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r e la ti ve ne glect of m u l t i n a t i o n a l s in the se rv ic e se ct or is unde rs ta nd ab le , give n the ge neral ab se nc e of any si ng le factor c o r r e s p o n d i n g to R & D in this sector.

Nevert he le ss , the re la ti ve neglect of se rv ic e sector MN Es is unjustified, e s p e c i a l l y in view of their c o n s i d e r a b l e sh ar e of total fo re ig n direct investment (FDI) activity, a p r o p o r t i o n wh i c h is still increasing in majo r d e v e l o p e d ec on om ie s. A n a l y s e d by ho me co untry and v o lu me of FDI, UK s e rv ic e sectors re pr e s e n t e d 36% of UK FDI in 1981, US se rvice se ct or s co ns t i t u t e d 44% of US FDI in 1985, w h i l e J a p a n e s e s e rv ic e sector MN Es had a c h i e v e d a remarkable 52% of J a p a n e s e FDI by 1 9 8 5 . 2

In this pape r we shall an alyse the role of one p a r t i c u l a r segment of the service sector, the a d v e r t i s i n g i n d u s t r y in Italy. We shall br ie fl y di s c u s s re levant ch a r a c t e r i s t i c s of a d v e r t i s i n g a c t i vi ty for e c o n om ic a n al ys is b e f o r e co ns i d e r i n g the p o s s i b l e issues an d p r o b l e m s in fl u e n c i n g the e v o l u t i o n of m u l t i n a t i o n a l a c t i v i t y in this sector. We then co ns id er some empirical ev id en ce r e ga rd in g the b e ha vi ou r of a d v e r t i s i n g firms in Italy in the light of the ea rlier analysis.

2. Da ta base d on o f f i ci al na ti on al sources, c o l l e c t e d in the U N C T C reporter (Spring 1987). The industries c a t e g o r i s e d as s e r v i c e sector are h i g h l y v a ri ed and in clude banking, insurance, hotels, t e l e c o m u n i c a t i o n s , re ta i l i n g and c o n s u l t a n c y as well as ad ve rt is in g. © The Author(s). European University Institute. version produced by the EUI Library in 2020. Available Open Access on Cadmus, European University Institute Research Repository.

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A d v e r t i s i n g as Service

S t u d e n t s of the se rv ic e sector ha ve id en t i f i e d s i m u l t a n e i t y of p r o d u c t i o n a n d c o n s u m p t i o n together wi th i n t a ng ib il it y, non s t o r e a b i l i t y , non tr ad ea b i l i t y and l o ca ti on s p e c i f i c i t y 3 as c o mm on c h a r a c t e r i s t i c s of most services. T h e y c o n s t i t u t e the crit er ia for d i s t i n g u i s h i n g s e rv ic es fr om ma nu fa c t u r i n g . By this de fi nition, ad ve r t i s i n g is not a pu re se rv ic e as it does not exhibit pe r f e c t s i m u l t a n e i t y of p r o d u c t i o n and consumption. Exam pl es such as h a i r d r e s s i n g a n d s h o e - s h i n i n g come closer to the idea of pu re s e r v i c e s .

In orde r to gr a d e services, H i r s c h (1986) p r o p os es a s i m u l t a n e i t y fa ct or base d on the p r o p o r t i o n of their total costs i n c u r r e d by the p r o d uc er and user du ri ng their interaction. T h e hi gh er these co st s the less tr a d e a b l e s e r v ic es are.

To i d e n t i f y the se rv ic e grade a n d the t r a d e a b i l i t y of a d ve rt is in g, it is us ef ul to d i vi de a d v e r t i s i n g into its two basi c phases: p r o d u c t i o n and broadc as ti ng . T h e p r o d u c t i o n ph a s e co me s first and involves r e s e ar ch into m a rk et c h a r a c t e r i s t i c s a c c o r d i n g to the c l ie nt 's pr od uc t p r o m o t i o n obje ct iv es . Th is kn ow l e d g e en ab le s the ad ve r t i s i n g a g e n c y to e x ec ut e or s u b c o n t r a c t the "creative" work, w h i c h c o n s is ts of films, texts or p i c t u r e s to be later b r oa dc as te d. As there is no c u s t o m e r in vo l v e m e n t in this phase, it e x h i b i t s the

3. See B o d d e w y n et al (1986) for a r e v i e w and d i s c u s s i o n of these ch a r a c t e r i s t i c s . © The Author(s). European University Institute. version produced by the EUI Library in 2020. Available Open Access on Cadmus, European University Institute Research

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c h a r a c t e r i s t i c of an o r d i na ry go od rather than a service. It can be stored, tr ad ed and the same m a t e r i a l s can be us ed in d i f f e r e n t locations. Of course, the f e a s ib il it y of such use d e p e n d s on the g e o g r a p h i c a l s p re ad and de gr ee of g l o b a l i s a t i o n of the a g en cy 's client. Mino r a d a p t a t i o n s or t o t a l l y n e w m a t e r i a l s are re qu ir ed if diff er en t ma rk et s c h a r a c t e r i s t i c s are judged to be important. This last s i t u a t i o n is the case for local firms and b r an ch es of what P o rt er (1986) call s m u l t i d o m e s t i c MNEs.

T h e b r o a d c a s t i n g ph as e of a d v e r t i s i n g gets closer to a p u r e s e rv ic e type. S i m u l t a n e i t y of b r o a d c a s t i n g and c o n s u m p t i o n is total in t e l e v i s i o n and ci ne ma ad ve rt s and u s u a l l y s i g n i f i c a n t for other me d i a such as pe ri odicals, pa nels, etc. L o c a t i o n s p e c i f i c i t y tends to be important, as language, c u lt ur e and so ci al a s pe ct s m a k e tr an s f e r a b i l i t y of m e d i a c o nt en t a c ro ss co un t r i e s rather limited. In te rn at io na l n e w s p a p e r s and tv tr an s m i s s i o n s via sate ll it e have a re duced impact o u t s i d e their ho me ma rkets. Pe ri sh ab il it y, be in g a ma jo r fe at ur e of br oa dc as ti ng , ma ke s m e d i a se le c t i o n crucial,

in orde r to m a x i m i s e a u d i e n c e le ve ls of reach.

The im pl ic a t i o n s for the m u l t i n a t i n a l i s a t i o n of a d v e r t i s i n g firms are s t r a i g ht fo rw ar d. The p r o d u c t i o n phas e e m b o d i e s a s i g n if ic an t level of fi rm s p ec if ic k n ow le dg e and can be m a i n l y p r o d u c e d in the home country. Therefore, the h o m e c o u n t r y a d v e r t i s i n g a g e n c y p o s s e s s e s a v a l u ab le a d v a n t a g e that can be e x p l o i t e d in other lo ca ti on s of its m u l t i n a t i o n a l clients.

In cont ra st , the b r o a d c a s t i n g ph as e imposes the need to p r o d u c e lo c a l l y at least one p a r t of the a d v e r t i s i n g process. C o u n t r y s p e c i f i c k n o w l e d g e b e co me s relevant, y i e l d i n g a © The Author(s). European University Institute. version produced by the EUI Library in 2020. Available Open Access on Cadmus, European University Institute Research Repository.

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c o m p e t i t i v e a d v a n t a g e for firms well e s t a b l i s h e d in the host country, ei ther na ti on al or ea rl y b r an ch es of a d v e r t i s i n g m u l t i n a t i o n a l s ( A M N E s ) . Th is co mp e t i t i v e a d v a n t a g e can be e n l a r g e d if the p r o d u c t i o n ph as e is also c o u n t r y specific.

Thus, the d e gr ee to w h i c h a d v e r t i s i n g a c t i v i t y needs to be c u s t o m i s e d to re sp on d to co un tr y sp ec if ic re qu ir e m e n t s wi ll a f fe ct the c o m p e t i t i v e ba la nc e b e tw ee n M N E s and d o m e s t i c a d v e r t i s i n g agencies. If c o un tr y sp ec i f i c i t y of a d v e r t i s i n g e f f o r t is low, we wo ul d expect AMNEs to ha ve a p o w e r f u l and e v e n d o m i n a n t p r e s e n c e in indivi du al countries. If it is high, this m a y h e l p g e n e ra te and su st ai n a c o m p e t i t i v e a d v a n t a g e 3 for e s t a b l i s h e d MN Es or local a d v e r t i s i n g ag en ci es . In the next s e ct io n we shall look at the pr es s u r e s u n d e r l y i n g these fa ct or s in mo re detail.

I n t e r n a l i s a t i o n and A d v e r t i s i n g MNEs

4. The co ncept of c o m p e t i t i v e a d v a n t a g e is o f t e n u s e d in this study. In ad ve rt i s i n g , it relates m a i n l y to quality, i.e., the p e r c e i v e d c a p a c i t y that a g i v e n a d v e r t i s i n g c a m p a i g n p o s s e s s e s to p r o d u c e an e f fi ci en t me ssage. 5

5. C o n s i s t e n t w i t h P o rt er (1986) we p r ef er to use the term c o m p e t i t i v e a d v a n t a g e rather than o w n e r s h i p advant ag e. The la tter can lead to c o n f u s i o n as, for example, the li ce n s i n g o p t i o n can in volve m a j o r tr an s f e r s of some o w n e r s h i p rights, w i t h o u t d i s t u r b i n g the u n d e r l y i n g c o m p e t i t i v e p o s i t i o n of the firms. See al so C a s s o n (1987, pp. 32-6) for d i s c u s s i o n of some p r o b l e m s a s s o c i a t e d w i t h this term.

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In order to a n a l y s e the role of MN Es in adve rt is in g, we n e e d to co nsider two di st in ct sets of p o te nt ia l clients. The first set c o ns is ts of po te n t i a l cl ie nt s w h o are themselves s u b s i d i a r i e s of a h o r i z o n t a l l y i n te gr at ed M N E and whos e a d v e r t i s i n g needs in the home c o un tr y have a l r e a d y been met by an a g e n c y se r v i n g the pa re nt in that location. The se cond set is c o m p os ed of all other po te n t i a l clients. We as su me that a su bs t a n t i a l p r o p o r t i o n of ad ve r t i s i n g ef fo rt is non c o u n t r y specific, but that some a d a p t a t i o n and a c c o m m o d a t i o n to c o u n t r y s p e c i f i c i t y is a l s o required. We shall first c o n s i d e r c o m p e t i t i o n for the first set of p o t e n t i a l clients.

For a M N E a d v e r t i s i n g a g en cy a l re ad y se rv i c i n g the p a r e n t of a p o t e n t i a l c l ie nt in the home country, there will u s u a l l y exist a s u b s ta nt ia l c o m p et it iv e ad va n t a g e in c o m p e t i n g for s u b s i d i a r y cl ie nt s in the host c o un tr y. ^ The m a r g i n a l p r o d u c t i o n p h a s e cost s of s e rv ic in g the pote nt ia l c l ie nt m a y be cl os e to zero, re fl ec ti ng the p u b l i c good n a t u r e of p r o d u c t i o n k n ow le dg e for a d d i t i o n a l user s in d i f f e r e n t locations. L o w de gr ee of c o un tr y s p e c i f i c i t y can g e n e r a t e ec on o m i e s in in fo r m a t i o n costs for an a d v e r t i s i n g M N E just as R & D can g e n e r a t e ec on o m i e s in in fo r m a t i o n for a m a n u f a c t u r i n g MNE.

T h e c o mm on link of the s i ng le cl ie nt in m u l t i p l e l o c a t i o n s is e x p l o i t e d by firms in other se rvice se ctors such as a c c o un ti ng , b a n k i n g and legal serv ic es (Dunning, 1987 pp. 44-7). Ho wever, the e c on om ie s of in fo r m a t i o n ca pa bl e of 6

6. St u d i e s of se r v i c e M N E s as cl ie nt f o ll ow er s have b e e n m a d e by K i n d l e b e r g e r (1983) for the ba nk in g sector a n d by D u n n i n g a n d M c Q u e e n (1981) for the hotel sector.

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e x p l o i t a t i o n in thes e sectors are li kely to be mu ch less than in the a d v e r t i s i n g sector, since thes e se c t o r s will si mp ly have to d u p l i c a t e m a n y p h y s i c a l a c t i v i t i e s (e.g. audits, invest me nt a n d legal analysis). T h e y te nd to face higher c o un tr y as well as task specificity. Th e non c o un tr y s p ec if ic kn ow l e d g e base d a d v e r t i s i n g pr od uc t is m o r e li ke ly to travel i n t e r n a t i o n a l l y at clos e to zero m a r g i n a l cost.

Thus, there are st ro ng c o m p e t i t i v e a d va nt ag es to AMNE s w i sh in g to c o n t i n u e to se rv ic e fo re ig n su b s i d i a r i e s of their m u l t i n a t i o n a l clients. However, this do es not ex p l a i n w h y FDI is the route c h o s e n by so m a n y a g e n c i e s s e r v i c i n g their clients' fo re ig n su bs id ia ri es . For ex ample, li ce n s i n g or e n t e ri ng into a joint v e n t u r e wi th a d o m e s t i c firm in the host c o u n t r y mi g h t f a c i l i t a t e i n t e g r a t i o n of the c o un tr y sp ec if ic c o m p o n e n t w i t h the i n t e r n at io na l p r o d u c t d e v e l o p e d by the m u l t i n a t i o n a l adve rt is er . F u rt he rm or e, if ther e are a number of p o t e n t i a l d o m e s t i c p a r t ne rs in the host country, c o un tr y s p e c i f i c k n o w l e d g e will not be f i r m specific; the ex is t e n c e of a n u mb er of po te n t i a l local p a r t n e r s co u l d cr eate c o m p e t i t i o n in the pool for the fa vours of the m u l t i n a t i o n a l a d v e rt is er , enab li ng the latter to a p p r o p r i a t e a c o n s i d e r a b l e p r o p o r t i o n of the q u a s i - r e n t s a s s o c i a t e d with the v e n t u r e or campaign. However, as D u n n i n g (1987, pp.44) p o in ts out, a l t h o u g h some j o in t- ve nt ur es a n d li m i t e d n o n eq uity a r r a n g e m e n t s do exist, the m a i n f o r m of fo re ig n i n ve st me nt in a d v e r t i s i n g is 100% m u l t i n a t i o n a l owners hi p. There ap pe ar to be si gn i f i c a n t b a r r ie rs to the e s t a b l i s h m e n t of c o l l a b o r a t i v e ar ra n g e m e n t s , for ex ample, li ce n s i n g or joint v e nt ur e a g r e em en ts . Full scale i n t e r n a l i s a t i o n is the typical pref er en ce . © The Author(s). European University Institute. version produced by the EUI Library in 2020. Available Open Access on Cadmus, European University Institute Research

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In fact, there a r e two ma jo r sets of tr an s a c t i o n costs that impede co ll a b o r a t i v e a g r e e m e n t s in this area, one set A M N E f o cu ss ed and the other set c l ie nt focussed.

First, fr om the point of v i e w of the AMNE, there m a y be t r a n s a c t i o n costs in tr a n s f e r r i n g in ta ng ib le a s se ts in the fo rm of i n f o rm at io n to a d o m e s t i c pa rt ne r in the host country. The d i f f i c u l t i e s in e v a l u a t i n g the va lu e of a d v e r t i s i n g ca mp a i g n s ex an te an d even ex po st me a n s that A M N E r e pu ta ti on is a c r i t ic al e l e m e n t in its a b il it y to m a rk et itself to its clients. D i f f i c u l t i e s in m o n i t o r i n g and c o n t r o l l i n g local partners' c o n t r i b u t i o n ma y lead to ge n u i n e c o n c e r n that r e pu ta ti on and imag e m a y be d a ma ge d by such tr an sactions. Moreover, a s se ts t r a n s f e r r e d to any local p a rt ne r m a y th em se lv es reveal impo rt an t insights into the s o ur ce s of c o m p e t i t i v e a d v a n t a g e s of the AMNE. O p p o r t u n i s t i c local p a r t n e r s m a y ut i l i s e su ch k n o w l e d g e in a w a y such that they b e c o m e d i re ct rivals of their A M N E pa rt ne r in future s i t u a t i o n s .

Second, there are al so tr an s a c t i o n costs p r o b le ms a s s o c i a t e d w i t h A M N E / l o c a l p a r t n e r c o - o p e r a t i v e a g re em en ts fr om the po in t of vi ew of the m u l t i n a t i o n a l client. Bein g c u s t o m i s e d to each c l i e n t ' s pr od uc t, a d v e r t i s i n g is not base d on a s p o t - t r a n s f e r a b l e technology: c u st om er s valu e past e x p e r i e n c e as we ll as cu rr en t links w i t h the a g e n c y © The Author(s). European University Institute. version produced by the EUI Library in 2020. Available Open Access on Cadmus, European University Institute Research Repository.

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network. A l s o if the local pa rtner a l r e a d y wo r k s w i t h a rival of the client, st ro ng co mp e t i t i o n b e t w e e n c l ie nt s woul d p r e c l u d e the p o s s i b i l i t y of the A M N E w o r k i n g wi th a local pa rt ne r su p p l y i n g such services. A re la te d m o t i v e is that the c l ie nt m a y not w i s h to d i s c l o s e p r iv at e in fo r m a t i o n us ed to g e n e r a t e the c a m p a i g n to a larger g r o u p of a d v e r t i s i n g co mp a n i e s than is necess ar y, due to in c r e a s e d risks of

Q le ak ag e of p r o p r i e t o r y k n o w l e d g e and c o m p e t i t i v e advant ag e. Co nt ro l m o n i t o r i n g and c o - o r d i n a t i o n p r o b l e m s are a l s o li kely to incr ea se w i t h the number of firms deal t w i t h by the client, d i r e c t l y or indirectly. C o n c e n t r a t i n g links on one a g e n c y is l i ke ly to e n ab le the c l ie nt to e c o n o m i s e on t r a n s a c t i o n costs.

Hence, b e c a u s e of these p o t e n t i a l l y s u b s t a n t i a l A M N E f o c u ss ed a n d c l ie nt f o c u ss ed t r a n s a c t i o n costs, we wo ul d

7. The p o t e n t i a l cl ie nt can ask the a d v e r t i s i n g a g e n c i e s to d i s p l a y some of their p r e v i o u s work. Ho we ve r, this is time c o n s u m i n g and do es not g u a r a n t e e the q u a l i t y of the s p e c if ic wo rk to be made. A l t e r n a t i v e l y , the c l ie nt can as k for an o u tl in e of the c a m p a i g n he is i n te re st ed in. T h e p r o b l e m is that o n c e he gets this m a t e r i a l he m a y no lo nger be w i l l i n g to p a y for it. Th is is a re fl ec ti on of wh at A r r o w has te rm ed the p a r a d o x of the d e m a n d for information. 8

8. M u l t i n a t i o n a l c l ie nt s p r ef er to work, w o rl dw id e, w i t h the same a d v e r t i s i n g c o m p a n y for two m a i n reasons. First, they fear that a larger number of a d v e r t i s i n g s u p p l i e r s will i n c r ea se the risk of o p p o r t u n i s t i c d i f f u s i o n of p r i v a t e i n f o r m a t i o n to some of their rivals. Second, g l ob al s t r a t e g i c c o h e r e n c e is ea si er to o b t a i n from the w o r l d w i d e u s e of the same a d v e r t i s i n g firm's services. R u g m a n (1986) has c o n s i d e r e d this p r o b l e m as one reason to i n t e r n a l i s e ce r t a i n f u nc ti on s in the firm.

F o r b e a r a n c e is e x p e c t e d from the s e l e c t e d A M N E due to impo rt an t valu e of fu tu re c o o p e r a t i o n w i t h the c l i e n t MNE, p o s s i b l y in a large number of di ff e r e n t locations.

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e x pe ct full scale i n t e r n a l i s a t i o n of o v e r s e a s a c t i v i t i e s A M N E se rv i c i n g clients' su bs id i a r i e s a b ro ad g e n e r a l l y to be p r e f e r a b l e to c o - o p e r a t i v e a g r e e m e n t s w i t h local partners. H o w wo ul d we expect co mp e t i t i v e issues to be r e fl ec te d in the ca se of the s e co nd set of pote nt ia l c l ie nt s abroad, those that are not s u b s i d i a r i e s of a p a r e n t c o m p a n y s e rv ic ed by an A M N E at home?

In this case, co mp e t i t i v e a d v a n t a g e s a r e less clear cut. The p o te nt ia l supp li er s of a d v e r t i s i n g services m a y co m p e t e m o r e s t r o ng ly in this m a rk et if ther e is no A M N E w i t h e s t a b l i s h e d links wi th the cl ie nt as in the p r e v i o u s case. However, US base d AM NE s m a y have a c o m p e t i t i v e ad va n t a g e if the st ro ng er h i s t o r y and d e v e lo pm en t of m a r k e t i n g in the US c o m p a r e d to other co un t r i e s is r e fl ec te d in c o m p e t i t i v e a d v a n t a g e s for firms d r a w i n g on those s k il ls a n d traditions. Co nv er se ly , d o m e s t i c firms or well e s t a b l i s h e d local a g e n ci es of AM NE s ma y o v e r c o m e such a c o m p a r a t i v e ad va nt ag e, to the ex te nt they have the edge in c o u n t r y - s p e c i f i c elements.

E m pi ri ca l A n a l y s i s

F r o m the p r e v i o u s d i s c u s s i o n on c o m p e t i t i v e n e s s and FDI in the a d v e r t i s i n g sector w i t h r e fe re nc e to Italy we can su mm a r i s e the h y p o t h e s e s to test: 1 - It al ia n firm s p o s s e s s a c o m p e t i t i v e a d v a n t a g e due to a h i gh er m a r k e t s p e c i f i c knowledge. © The Author(s). European University Institute. version produced by the EUI Library in 2020. Available Open Access on Cadmus, European University Institute Research Repository.

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This h y p o t h e s i s is base d on the H y m e r - K i n d l e b e r g e r 9

p a r a d i g m . In order to be nefit from p r o m o t i n g a FDI, the M N E must po s s e s s some co u n t e r v a i l i n g a d v a n t a g e over local firms who en jo y b e tt er i n f o rm at io n about the e c o n o m i c e n v i ro nm en t in their country.

2 - A M N E s ha ve a co mp e t i t i v e a d v a n t a g e b e ca us e of s e rv ic in g the parent.

The a d v e r t i s i n g firms have been d i v i d e d in thre e gr ou ps - US based, E u ro pe ba s e d {outside of Italy), a n d Italy based. In the case of clients, an a d di ti on al c l a s s i f i c a t i o n "Others" has be en c o n s i d e r e d . 910

3 - A m e r i c a n A M N E s po ss es s a g l o b a l c o m p e t i t i v e a d v a n t a g e d u e to their nationality.

Th is h y p o t h e s i s mi g h t be e x p l a i n e d by the larger e x pe ri en ce of firms wh o s e he a d q u a r t e r s ar e lo ca te d in the largest a d v e r t i s i n g m a rk et as well as p i o n e e r one (in the

19th. century). Basically, it coul d be st ated by the

fo ll ow in g qu es ti on : do A m e r i c a n s have a c o m p e t i t i v e a d v a n t a g e in a d v e r t i s i n g the way, for instance, the J a p a n e s e ha ve in car m a ki ng ?

9. A r e vi ew of this t h eo ry can be fo u n d in C a lv et (1981). 10. J a p a n is the mo st important ba se c o u n t r y for cl ients in cluded in this r e l a t i v e l l y little s i g n i f i c a n t group. It is i n t e re st in g to o b s e r v e that a l t h o u g h the third la rgest a d v e r t i s i n g fi rm in the W o r l d in 1986, D e nt su Inc., was J a pa ne se this re sults fr om a v e r y h i g h ho me m a rk et c o n c e n t r a t i o n (it seems a c c e p t a b l e to local cl i e n t s in a c o mm on p r o d u c t sector to be r e p r e s e n t e d by the same a d v e r t i s i n g agency. In this respect the J a p a n e s e a p pe ar to be unique) and not fr om o v e r s e a s expansion.

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4 - C o m p e t i t i v e a d v a n t a g e s k n o w l e d g e .

Th is hypoth es is di ff er s un le ss fo re ig n ad ve r t i s i n g firms in the Italian market.

d e r i v e fr om c o un tr y s p e c i f i c

fr om the two p r e v i o u s ones, have be en long e s t a b l i s h e d

To test these h y p o t h e s e s we have c o m p a r e d the p e r f o r m a n c e of the three groups of a d v e r t i s i n g a g e n ci es ac co r d i n g to their m a rk et share. We have re jected a n a l y s i s of a l t e r n a t i v e cr iteria such as p r o f i t a b i l i t y or ad d e d value, for the following reasons:

First, p r o f i t a b i l i t y is di ff i c u l t to m e as ur e in the se rv ic e sector. Therefore, the c l as si ca l p r o b l e m a s s o c i a t e d with the incentive for MN Es to d i s p la ce p r of it s to co un t r i e s with m o r e favour ab le t a x a ti on is m o r e se rious w i t h i n AMNEs.

Second, c o m p ar is on s ba se d on adde d value or sales ( b i l l i n g s ) 1 per em pl oy ee are not ve ry mean in gf ul , as a d v e r t i s i n g firms range f r o m the quas i br ok er type to the

12

c o mp le te se rv ic e type. 1112

11. For m o s t types of services, sales are d i f f i c u l t to define. B a nk in g is just a ty pical example. In adve rt is in g, the t e r m bi l l i n g is e m p l o y e d to repr es en t the whol e bu dg et a d m i n i s t r a t e d by the agency, i.e., the total a d v e r t i s i n g costs the ag en cy 's cl ie nt s support. Here this valu e will be c o n s i d e r e d as a s y n o n i m o u s of sales. The share r e t a i n e d by the a g e n c y - gross m a r g i n - g e n e r a l l y co rr e s p o n d s to 15% of that value.

12. Some ad ve r t i s i n g firms go even further, e n t e ri ng into m a n a g e m e n t consultancy. "A dv er t i s i n g Age" (1987, M a r c h 26, p.2) q u o t e s Mr. Saachi, fr om "Saatchi a n d Sa atchi" w h o e x p r e s s e d his view that the c o mp an y intends to "merge the ex ternal w i t h the internal".

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Finally, due to a shortage of h i st or ic al data, we p e r f o r m a cross se ct io n analysis. Ma rk et shares c o r r e s p o n d to a m o r e st ab le indicator wi th mi no r va ri a t i o n s from year to y e a r .

Data

The a n a l y s i s co ve rs 37 out of the 50 largest a d v e r t i s i n g a g en ci es o p e r a t i n g in Italy in 1987. Globally, they had a share of 68.4% of the a d v e rt is in g market. As can be seen in ex h i b i t 1, the sa mple includes 14 Amer ic an , 9 E u r o p e a n a n d 14 It a l i a n firms. The same exhibit sh ow s their rela ti ve p e r c e n t a g e (column 6) and ma rk et shar e (7). Ex hi bi t 4 d i s p l a y s the a v e r a g e m a rk et share per na ti o n a l i t y of the a d v e r t i s i n g company.

B i l l i n g s wher e c o ll ec te d from "P ub bl ic it à Domani" and are ba se d on i n f o rm at io n supp li ed by the agencies. A g e was o b t a i n e d f r o m c o mp an y reports as well as fr om the It al ia n a d v e r t i s i n g a s s o c i a t i o n (ASSAP). The total ma rk et d i m e n s i o n has be en c o m p ut ed by UPA, an institute c r e a t e d by the media, a d v e r t i s i n g a g e n ci es a n d a d v e rt is in g customers.

The Italian a d v e r t i s i n g indu st ry show s a low level of c o n c en tr at io n. The four firms c o n c e n t r a t i o n ratio is equal to a small 18.95%. A m o r e a c c u ra te m e as ur e c a n be o b t a i n e d by © The Author(s). European University Institute. version produced by the EUI Library in 2020. Available Open Access on Cadmus, European University Institute Research

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13

co mp ut in g the H e rf in dh al index, wh i c h give s a value of .0226. This is e q ui va le nt to the ex is t e n c e of 44 e q ua ll y sized firms in the It alian a d v e r t i s i n g in dustry wh i c h co nfirms the v e r y low c o n c e n t r a t i o n of this industry.

However, the p r od uc t of the a d v e r t i s i n g indu st ry is hi gh ly d i ff er en ti at ed : an a d v e r t i s i n g c a m p a i g n p r o d u c e d by one a g e n c y is an impe rf ec t s u bs ti tu te for a d v e r t i s i n g campaigns p r o d u c e d by other agencies. R i va lr y is st ro ng and many s t r a t e g i e s are im pl e m e n t e d to o b t a i n the cust om er s of r i v a l s .

Firm s a v o i d d i s c l o s i n g in fo r m a t i o n on b i ll in gs per cu stomer or per pr od uc t ad ve rt is ed . To o v e r c o m e this p r o b l e m an a l t e r n a t i v e rule of th um b m e a s u r e has be en taken as a proxy for b i l l i n g s per product. Ea ch year the A S S A P pu bl i s h e s a list of the p r o d u c t / c l i e n t d i s t r i b u t i o n per a d v e r t i s i n g agency. Th e s e data, a v a i l a b l e for the 37 a g e n c i e s incl ud ed in the sample, ha ve be en t r ea te d in order to d i s t r i b u t e the p r od uc ts per co u n t r y of o r i g i n (only for the cases in wh i c h home c o u n t r y co ntrol over di st ri bu ti on , at least, was a s s u m e d ) .

13. T h e H e r f i n d h a l index was c o m p u t e d by doing:

H = E l S j)2

Be in g Sj = M a rk et share of fi rm .

T h e n u mb er s e q u i v a l e n t (N) was o b t a i n e d by doin g N = (1/H).

For a d i s c u s s i o n of the c o n c e n t r a t i o n m e as ur es and a c o m p a r i s o n the va lu es o b t a i n e d for a set of i n du st ri es in the US see M a r t i n (1988). © The Author(s). European University Institute. version produced by the EUI Library in 2020. Available Open Access on Cadmus, European University Institute Research Repository.

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T h e s e nu mb er s we re then w e i g h t e d by the agencies' m a r k e t sh ar e unde r the a s s u m p t i o n that larger firms tend to h a v e larger clients. It is be li ev ed that this s i m p l i f i e d p r o c e d u r e improves the a c c u r a c y of a ve ry rough proxy.

T h e si mp le c a l c u l a t i o n was d o n e by b u i l di ng a 37 X 4 ma tr ix , r e p r e s e n t i n g 37 ad ve r t i s i n g a g e n c i e s and 4 pr od uc t

c e l l ij

valu e of each cell was X. . ,. S . * 1] 3 ^ i?4 3 < 3 7z: X. . . s .13 3 b e i n g , Nu mber of p r o d uc ts of n a t i o n a l i t y a d v e r t i s e d by a g e n c y Sj = M a r k e t share of a g en cy j.

The results are s y n t h e ti ca ll y p r e s e n t e d in e x hi bi t 1. E a c h cell of the 3 X 4 table wi th fi gures in bo ld c h a r a c t e r s sh ow s the p e r c e n t a g e of p r o d uc ts sold in Italy a d v e r t i s e d by a g e n c i e s of a g i v e n na ti onality. For instance, the va lu e 86.2%, g i vi ng the p e r c e n t a g e of A m e r i c a n p r o d u c t s a d v e r t i s e d in Ital y by A m e r i c a n a g e n c i e s was o b t a i n e d by doing:

21 * i--US;ju s <14 X USj i-US;j < 3 7 X USj T h e result of this c o m p u t a t i o n is sh ow n in ex h i b i t 1: © The Author(s). European University Institute. version produced by the EUI Library in 2020. Available Open Access on Cadmus, European University Institute Research

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E X H I B I T 1

Clients' Na ti o n a l i t y

U S A EUR ITA OTH NF %NF %MSH

(1) (2) (3) (4) (5) (6) (7) US A 86.2 48.8 34.6 39.2 14 37.8 48.7 A g e n c i e s 1 EUR 11.3 36.6 22.6 36.1 9 24.3 24.3 N a t i o n a l . ITA 2.6 14.6 42.8 24.7 14 37.8 27.0 Tota l 100% 100% 100% 100% 37 100% 100% A n a l y s i s and Re sults 14

W e c a r r i e d out a o n e - w a y anal ys is of v a r i a n c e , i.e., the st ud y of the v a r i a b i l i t y of the o b s e r v a t i o n s w i t h i n a g r o u p ab o u t the g r o u p m e a n and va ri a b i l i t y of the grou p me an s. For the di ff e r e n t comparisons, the levels of s i g n i f i c a n c e will be s u m m a r i s e d in terms of the F s t at is ti c 14

14. The s t a t i s t i c a l a n a l ys es we re ca rried out usin g "STAT V I E W 512 +" in a M a c i n t o s h PC. © The Author(s). European University Institute. version produced by the EUI Library in 2020. Available Open Access on Cadmus, European University Institute Research Repository.

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(between and w i t h i n groups) a n d the S c he ff e test (ST)1 5 , g e n e r a l l y c o n s i d e r e d a co ns er v a t i v e test. A n a s t e r i s c me a n s that the v a ri an ce under co ns i d e r a t i o n is si gn i f i c a n t for the 95% interval.

The first c o m p a r i s o n relates p e r c e n t a g e of prod uc ts of a gi ve n nati on al it y, per ad ve r t i s i n g agency, wi th its nationality. T h e c o m p a r i s o n is p e r f o r m e d in 4 stages, one for each pr od uc t nationality. Bo th the o r i g i n a l da ta and its w e i g h t i n g by a g e n c y ' s m a rk et share ha ve led to the same conclusions. O n l y the results for the s e co nd co mp u t a t i o n are pr es e n t e d here:

15. T h e S h ef fe test be l o n g s to the f a m i l y of the 'a p o s t e r i o r i c o n t r a s t tests'. It uses a s i n g l e range valu e for all c o mp ar is on s, w h i c h is a p p r o p r i a t e for ex am i n i n g all p o s s i b l e linear c o m b i n a t i o n s of gr ou p means. For the d e t a i l e d p r e s e n t a t i o n of tests a s s o c i a t e d w i t h v a r i a n c e a n a l y s i s see Sachs (1982). © The Author(s). European University Institute. version produced by the EUI Library in 2020. Available Open Access on Cadmus, European University Institute Research

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E X H I B I T 2 PR OD UC T O R IG IN

USA EUR ITA O T H

F test 15,.2 p= .0 00 1 7.2 p = .0001 .32 p = .732 .71 p = .5007 N a t i o n a l i t y of Advert. A g e n c i e s M E A N U S A 1.241 .874 1.271 .089 EUR .249 1.021 1.298 .129 ITA .037 . 259 1.578 .057 C o m p a r i s o n be tw ee n Sc he ff e Test a g en ci es national. U S A vs EUR 7.324* .211 .002 .214 U S A vs ITA 13.778* 4.725* .27 .18 EUR vs ITA .333 5.674* .177 .702

As the F tests i n d i c a t e , there is a s i g n if ic an t r e l a t i o n s h i p between pr o d u c t n a t i on al it y and a g en cy n a t i o n a l i t y for A m e r i c a n a n d E u r o p e a n p r o d u c t s and a d v e r t i s i n g agencies, mo re so for the first pair of re la tionships.

This result can be d i r e c t l y o b s e r v e d in the me an s

table. Th is should be read as follows: on average, each

A m e r i c a n a d v e r t i s i n g a g e n c y a d v e r t i s e s A m e r i c a n p r o d u c t s a m o u n t i n g to 1.241% of all p r o d u c t s a d v e r t i s e d in Italy. The

ma in diagonal: 1.241, 1.021, 1.578 (products of 'other'

o r i g i n be i n g ignored) shows the hi gh es t va lu es of ea ch c o lu mn r e ve al in g that, in all cases, there is a r e l a t i o n s h i p b e t w e e n the n a t i o n a l i t y of the p r o d u c t and the n a t i o n a l i t y of the agency. Ho wever, the s u p e r i o r i t y of It al ia n a d v e r t i s i n g a g e n c i e s for It alian p r o d u c t s (column 3) is small wi th respect to both E u r o p e a n a n d A m e r i c a n agencies.

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The Sc he ff e test co nf ir ms these results, by c o mp ar in g a d v e r t i s i n g a g en ci es nationalities, two by two, for each p r o d u c t nationality. An a s te ri sc me an s a si gn i f i c a n t r e l a t i o n s h i p at the 95% interval. For instance, we ob se rv e that A m e r i c a n agen ci es o u t p e r f o r m It alian a g e n ci es wi th respect to b o t h A m e r i c a n an d E u r o pe an products.

Thes e results en ab le the testing of h y p o t h e s e s 1 and 2 p r e v i o u s l y formulated:

Hy po t h e s i s 1 is rejected. Italian firms do not show a s t a t i s t i c a l l y sign if ic an t su pe ri or it y, not ev en w i t h respect to Italian clients.

H y p o t h e s i s 2 is confirmed. A m e r i c a n a n d E u r o p e a n AM N E s ex hi bi t a sign if ic an t s u p e r i o r i t y vis a vis c u s t o m e r s of the same nationality. The s e co nd h y po th es is al so re ce iv es some support, from the fact that E u r o p e a n AM N E s ha ve a low but not s i g n if ic an t su pe r i o r i t y over Italian agencies, for A m e r i c a n customers. A m e r i c a n AMNE s ha ve a s i g n if ic an t s u p e r i o r i t y over It al ia n firms in a t t r a c t i n g E u r o p e a n clients. Be si de s b e n e f i t i n g fr om a ge ne r a l l y higher reputation, A m e r i c a n AM N E s m a y since long serve E u r o p e a n m u l t i n a t i o n a l s and thus ke ep cu st o m e r s out of their "natural" suppliers.

For the Italian customers, It al ia n a g e n c i e s e x hi bi t a supe ri or mean, but not a s t a t i s t i c a l l y si gn i f i c a n t di ff er en ce . Th er ef or e, c o un tr y sp ec if ic fa ct or s are i m po rt an t (hypothesis 4) but, appa re nt ly , not s u ff ic ie nt to c o n s t i t u t e an u n s u r m o u n t a b l e barrier for AMNE s e n t r y in the It alian ma rket. On the other hand these co un tr y s p e c i f i c fa ct or s show a l mo st no impact on A m e r i c a n a n d a ve ry small one on E u r o p e a n customers. The results for p r o d u c t s of "other" o r i g i n s are

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less clear cut, as sh ould be e x p e ct ed f r o m the p r e v i o u s di sc ussion. A C a n a d i a n or J a p a n e s e M N E does not find an It alian b r an ch of an A M N E of the same na ti o n a l i t y and the d e c i s i o n to choose b e tw ee n fi rm spec if ic kn ow l e d g e and w o r l d w i d e co ns i s t e n c y (AMNE) and c o un tr y s p e c i f i c kn ow l e d g e

(predo mi na nt ly It alian agencies) is m o r e balanced.

The argu me nt on c o un tr y sp ec i f i c i t y needs to be mo re p r e c i s e l y anal ys ed as n a t i o n a l i t y is not a pe rf ec t c r i t er ia for e v a l u a t i n g c o u n t r y s p ec if ic knowledge. A be tt er proxy, r e fl ec ti ng experience, woul d be age, as it was p r e v i o u s l y noted. The variance a n a l ys is b e tw ee n age and m a r k e t share was p e r f o r m e d defi ni ng 4 a g e groups: 0-10, 11-20, 21-30 a n d over 31. T h e Sc heffe test was a l wa ys non si gn i f i c a n t and inferior to .8. R e su lt s rela ti ve to means, number of firms a n d F test are s u m m a r i s e d on ex hi bi t 3: E X H I B I T 3 F Test 1.3 p = .3001 G r o u p N. of Firms Av. M a r k e t Sh ar e (%) <10 6 2.175 11-20 14 2.123 21-30 8 3.422 >31 9 3.317

The results are inconclusive. a l t h o u g h ol de r firms tend to d i s p l a y a larger ma rk et share. One e x p l a n a t i o n for this weak re la ti on b e t w e e n age and m a rk et sh ar e wo ul d be the c o m b i n a t i o n of p e op le e m bo di ed k n o w l e d g e and high p e r s o n n e l mobility. A g g r e s s i v e recently e s t a b l i s h e d firms m a y have hire d some of their rivals' best em p l o y e e s ob ta in in g, as a

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c o ns eq ue nc e, competitors' cl ients or n e w ad ve r t i s i n g . . . 1 6

c l i e n t s .

F i n a l l y we e x am in ed the global re lation b e tw ee n n a t i o n a l i t y and m a r k e t share. The results are s u mm ar is ed on ex h i b i t 4:

EX H I B I T 4

Number Av. M a r k e t Share N a t i o n a l i t y of Ad ve rt . A g e n c i e s U S A 14 3.479 EUR 9 2.695 ITA 14 1.931 C o m p a r i s o n be tw ee n a g e n c i e s national. U S A vs EUR U S A vs ITA EUR vs ITA Sc heffe Test .488 2.428 .462 Fisher PL SD 1.614 1.428* 1.614

A mo re f l e x ib le test of si gn if i c a n c e (Fisher PLSD) was p e r f o r m e d as the Sc heffe test did not s h o w a n y si gn i f i c a n t variance. The c o n c l u s i o n is c o ns is te nt w i t h the p r e v i o u s a n a l y s e s and tests and shows a ge ne ra l s u p e r i o r i t y of

16. B e t w e e n 1981 and y e a r l y a v e r a g e real firms e x p e r i e n c e d no v a r i a t i o n s .

1987 the ad ve r t i s i n g m a r k e t gr ew at an rate superior to 10%. However, a few g r ow th leading to s t r o n g m a r k e t sh a r e © The Author(s). European University Institute. version produced by the EUI Library in 2020. Available Open Access on Cadmus, European University Institute Research

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A m e r i c a n AMNEs. The import an ce of co untry sp ec if ic fa ctors re mains an o b st ac le to a mo re clear p r e d o m i n a n c e of bo th A m e r i c a n and E u r o pe an AMNEs.

The general results o b ta in ed wi th our data m a y be too strong. The exact m e a s u r e m e n t wo u l d require the o b s e r v a t i o n that the A M N E serves a client, both at home and in the host country. In our o b s e r v a t i o n it is p o s s i b l e that in some cases a c l i e n t is wo r k i n g with two d i ff er en t AMNE s of the same n a t i o n a l i t y rather than bein g s e rv ed by the same AMNE. A n e d o c t a l evidence, however, conf ir ms that in mo st cases n a t i o n a l i t y is a g o o d pr o x y for cr os sb or de r consistency.

Co nc l u s i o n

M u l t i n a t i o n a l a d v e r t i s e r s co nt ro l over 65% of the It a l i a n a d v e r t i s i n g market. The theory of m u l t i n a t i o n a l e n te rp ri se s, n a me ly of in te rn al is at io n, p r o v i d e s an e x p l a n a t i o n for this im po rt an t role of the AMNE.

The import an ce of trust leads the m u l t i n a t i o n a l c u s t om er to try to be s e rv ed wo rl d w i d e by the same AMNE. E v i d e n c e on the link b e tw ee n ad ve r t i s i n g firm's n a t i o n a l i t y a n d the c l ie nt 's n a t i o n a l i t y conf ir ms this explanation.

C o m p e t e n c e is al so a sign if ic an t factor for s c r u t i n y of a d v e r t i s i n g supp li er s and redu ct io n of s e ar ch costs. A m e r i c a n A M N E s we re found to m a i n t a i n a g o o d p e r f o r m a n c e in the non A m e r i c a n base d m a r k e t segments. This co nf ir ms their p o s i t i v e reputation. A c o m p e t i t i v e ad va n t a g e a r is es fr om the ge ne ra l © The Author(s). European University Institute. version produced by the EUI Library in 2020. Available Open Access on Cadmus, European University Institute Research Repository.

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b e li ef that A m e r i c a n AM N E s can p r od uc e better a d v e r t i s i n g ca mp ai gn s, th ro ug h ef fi c i e n t pr oduct differ en ti at io n.

Finally, c o u n t r y sp ec if ic k n ow le dg e ap p e a r s to be a s i g n i f i c a n t barrier, but AMNE s su rmount this p r o b l e m by h i r i n g e x p e r i e n c e d p r o f e s s i o n a l s and u n d e r t a k i n g r e s e ar ch on local m a r k e t s c h ar ac te ri st ic s.

The de ep e n i n g of know le dg e on FDI and c o m p e t i t i o n w i t h i n the a d v e r t i s i n g sector wo ul d be ne fi t from two a d d i t i o n a l lines of research. The first de ri ve s from the e x t e n s i o n of the m e t h o d o l o g y used here. V a r i a t i o n of se ct or s of a d v e r t i s i n g cl i e n t s mi g h t reveal si gn if ic an t d i f f e r e n c e s

be tween, for instance, the car in dustry and the hotel

industry. The se co nd line of re se ar ch is the study of the m u l t i n a t i o n a l i s a t i o n in a d v e r t i s i n g t h ro ug h a be ha v i o u r a l appr oa ch . T h e first such wo rk was p r o d u c e d by A. W e i n s t e i n (1977) but the recent e v o l u t i o n of tr ad e and FDI have s u b s t a n t i a l l y c h a n g e d the c o nd it io ns p r e v a i l i n g at the time of his study. © The Author(s). European University Institute. version produced by the EUI Library in 2020. Available Open Access on Cadmus, European University Institute Research

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B I BL IO GR AP HY

Boddewyn, J.J, Halb ri ch , M.B. a n d Perry, A.C. (1986) "S ervice MNEs: C o n c e p t u a l i z a t i o n , M e a s u r e m e n t and Theory", Jo ur na l of I n t e r n a t i o n a l B u s i n e s s S t u d i e s , Vol. XVII N.3, Fall

Calvet, A.L. (1981) "A S y nt he si s of F o re ig n Di re ct In ve st me nt T h e o r i e s and T h e o r i e s of the M u l t i n a t i o n a l Firm", Jo u r n a l of In te r n a t i o n a l B u s i n e s s S t u d i e s ", S p r i n g / S u m m e r , pp. 43-59

Casson, M.C. (1987) "The F i r m a n d the Market: St u d i e s in M u l t i n a t i o n a l E n t e r p r i s e and the Scop e of the F i r m ", Oxford: Bl a c k w e l l an d C a m b r i d g e

Casson, M.C. (1988) "F or ei gn Di re ct I n ve st me nt in In fo r m a t i o n Services: A n E c o n o m i c An al ys is ", (Mimeo)

Caves, R.E. (1982) "M ul ti na ti on al E n t e r p r i s e and E c o n om ic An al ys is ", C a m b r i d g e U n i v e r s i t y Press

Dunning, J.H. (1987) "MNE's in the Se rv ic e Sector: O l d Wi ne in N e w Bottles", (Mimeo)

Du nning, J.H. a n d Mc Queen, M. (1981) "The E c l e c t i c T h e o r y of I n t e r n a t i o n a l Prod uc ti on : A Ca se Stud y of the In te r n a t i o n a l Hote l Industry", M a n a g e r i a l a n d D e c i s i o n E c o n o m i c s , 21, December, pp. 197-210 Ga lb ra it h, S.C. a n d Kay, N.M. (1986) "T owards a T h e o r y of M u l t i n a t i o n a l En te r p r i s e " Jo ur na l of E c o n o m i c B e h a vi or and O r g a n i z a t i o n " Vol. 7 N.l Mar, pp. 3-19 © The Author(s). European University Institute. version produced by the EUI Library in 2020. Available Open Access on Cadmus, European University Institute Research

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Hennart, J.F. (1986) "What is Internal iz at io n" , W e l t w i r t s c h a - f tliches A r c h i v , BD CXXII, pp. 791-804

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Kay, N.M. (1983) "M ul ti na ti on al Enterprise: A R e v i e w A r t i cl e" S c o t ti sh J o ur na l of P o li ti ca l E c o n o m y , 30, pp. 304-12 K i n d l e b e r g e r , C.P. (1983) " I n t er na ti on al Banks as L e ad er s or F o ll ow er s of In te rn at io na l Business" J o ur na l of B a n k i n g and F i n a n c e , 7, 4, pp. 583-95 Martin, S. (1988) " In du st ri al Ec on om ic s: E c on om ic A n a l y s i s a n d P u bl ic P o l i c y ", Ne w York: Macmillan.

Porter, M.E. (1986) "Com pe ti ti on in G l o b a l Industries: A C o n c e p t u a l Framew or k" in "C o m p e t i t i o n in G l ob al I n d u s t r i e s " by M.E. P o rt er (Ed.), 1st. Ch., H a r v a r d B u s i n e s s Sc ho ol Pres s

Rugman, A. M. (1 98 7) "MNEs and Trad e in Services: A T r a n s a c t i o n Cost A p p r o a c h " , W e l t w i r s c h l a f t l i c h e s A r c h i v , 123(4), p p 651-67

Sachs, L . ( 1 9 8 2 ) "Ap p l i e d S t a t i s t i c s ",New York: Sp r i n g e r - V e r l a g

Teece, D. (1986) " T ra ns ac ti on Co st Ec on o m i c s a n d the M u l t i n a t i o n a l En te rp ri se " Jo ur na l of E c o n o m i c B e h a vi or a n d O r g a n i z a t i o n , Vol.7, N.l Mar, p p . 21-45

Weinst ei n, A.K. (1977) "F oreign In ve s t m e n t s by Se rv ic e Firms: The C a s e of M u l t i n a t i o n a l A d v e r t i s i n g Agenci es ", J o u r n a l of In te r n a t i o n a l B u si ne ss S t u d i e s , pp. 83-91 © The Author(s). European University Institute. version produced by the EUI Library in 2020. Available Open Access on Cadmus, European University Institute Research Repository.

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B. BENSAID/ R.J. GARY BOBO/ S. FEDERBUSCH

The Strategic Aspects of Profit Sharing in the Industry

89/372

Jean-Philippe ROBE

Countervailing Duties, State Protectionism and the Challenge of the Uruguay Round

89/374

Francisco S. TORRES

Small Countries and Exogenous Policy Shocks

89/375

Renzo DAVIDDI

Rouble Convertibility: A Realistic Target

89/377

Elettra AGLIARDI

On the Robustness of Contestability Theory

89/378

Stephen MARTIN

The Welfare Consequences of Transaction Costs in Financial Markets

89/381

Susan SENIOR NELLO

Recent Developments in Relations Between the EC and Eastern Europe

89/382

Jean GABSZEWICZ/ Paolo GARELLA/ Charles NOLLET

Spatial Price Competition With Uninformed Buyers

89/383

Benedetto GUI

Beneficiary and Dominant Roles in Organizations: The Case of Nonprofits

89/384

Agustfn MARAVALL/ Daniel PENA Missing Observations, Additive Outliers and Inverse Autocorrelation Function

89/385

Stephen MARTIN

Product Differentiation and Market Performance in Oligopoly

Dalia MARIN

Is the Export-Led Growth Hypothesis Valid for Industrialized Countries?

89/387

Stephen MARTIN

Modeling Oligopolistic Interaction

89/388

Jean-Claude CHOURAQUI

The Conduct of Monetary Policy: What has we Learned From Recent Experience

89/390

Corrado BENASSI

Imperfect Information and Financial Markets: A General Equilibrium Model

89/394

Serge-Christophe KOLM

Adequacy, Equity and Fundamental Dominance: Unanimous and Comparable Allocations in Rational Social Choice, with Applications to Marriage and Wages

89/395

Daniel HEYMANN/ Axel LEUONHUFVUD On the Use of Currency Reform in Inflation Stabilization

89/400

Robert J. GARY-BOBO

On the Existence of Equilibrium Configurations in a Class of Asymmetric Market Entry Games

89/402

Stephen MARTIN

Direct Foreign Investment in The United State

89/413

Francisco S. TORRES

Portugal, the EMS and 1992: Stabilization and Liberalization

89/416

Joerg MAYER

Reserve Switches and Exchange-Rate Variability: The presumed Inherent Instability of the Multiple Reserve-Currency System

89/417

José P. ESPERANÇA/ Neil KAY

Foreign Direct Investment and Competition in the Advertising Sector: The Italian Case

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89/418

Luigi BRIGHI/ Mario FORNI

Aggregation Across Agents in Demand Systems

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No. ... Author, title: ... Date Signature © The Author(s). European University Institute. version produced by the EUI Library in 2020. Available Open Access on Cadmus, European University Institute Research

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Sharing in the Industry

8 9 /3 7 1

Klaus-Dieter STADLER

Die Europâische politische

Zusammenarbeit in der

Generalversammlung der

Vereinten Nationen zu Beginn

der Achtziger Jahre

8 9 /3 7 2

Jean-Philippe ROBE

Countervailing Duties, State

Protectionism and the Challenge

of the Uruguay Round

8 9 /3 7 3

G. FEDERICO/A. TENA

On the Accuracy of Historical

International Foreign Trade

Statistics.

Morgenstern Revisited

8 9 /3 7 4

Francisco S. TORRES

Small Countries and Exogenous

Policy Shocks

8 9 /3 7 5

Renzo DAVIDDI

Rouble Convertibility:

A Realistic Target

8 9 /3 7 6

Jean STAROBINSKI

Benjamin Constant: la fonction

de l’éloquence

8 9 /3 7 8

Stephen MARTIN

The Welfare Consequences of

Transaction Costs in Financial

Markets

8 9 /3 7 9

Augusto DE BENEDETTI

L’equilibrio difficile. Linee di

politica industriale e sviluppo

dell’impresa elettrica nell’Italia

meridionale: la Società

Meridionale di Elettricità nel

periodo di transizione, 1925-

1937

8 9 /3 8 0

Christine KOZICZINSKI

Mehr “Macht” der Kommission?

Die legislativen Kompetenzen

der Kommission bei Untatigkeit

des Rates

8 9 /3 8 1

Susan SENIOR NELLO

Recent Developments in

Relations Between the EC and

Eastern Europe

8 9 /3 8 2

Jean GABSZEWICZ/

Paolo GARELLA/

Charles NOLLET

Spatial Price Competition With

Uninformed Buyers

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in Organizations: The Case of

Nonprofits

8 9 /3 8 4

Agustin MARAVALL/

Daniel PENA

Missing Observations, Additive

Outliers and Inverse

Autocorrelation Function

8 9 /3 8 5

Stephen MARTIN

Product Differentiation and

Market Performance in

Oligopoly

8 9 /3 8 6

Dalia MARIN

Is the Export-Led Growth

Hypothesis Valid for

Industrialized Countries?

8 9 /3 8 7

Stephen MARTIN

Modeling Oligopolistic

Interaction

8 9 /3 8 8

Jean-Claude CHOURAQUI

The Conduct of Monetary

Policy: What has we Learned

From Recent Experience

8 9 /3 8 9

Léonce BEKEMANS

Economics in Culture vs.

Culture in Economics

Financial Markets: A General

Equilibrium Model

8 9 /3 9 1

Patrick DEL DUCA

Italian Judicial Activism in Light

of French and American

Doctrines of Judicial Review

and Administrative

Decisionmaking: The Case of

Air Pollution

8 9 /3 9 2

Dieter ZIEGLER

The Bank of England in the

Provinces: The Case of the

Leicester Branch Closing, 1872

8 9 /3 9 3

Gunther TEUBNER

How the Law Thinks:

Toward a Constructivist

Epistemology of Law

8 9 /3 9 4

Serge-Christophe KOLM

Adequacy, Equity and

Fundamental Dominance:

Unanimous and Comparable

Allocations in Rational Social

Choice, with Applications to

Marriage and Wages

8 9 /3 9 5

Daniel HEYMANN/

Axel LEIJONHUFVUD

On the Use of Currency Reform

in Inflation Stabilization

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Studies in the Humanities and

Social Sciences

8 9 /3 9 7

Giovanna C. CIFOLETl'l

Quaestio sive aequatio:

la nozione di problema nelle

Regala e

8 9 /3 9 8

Michela NACCI

L’équilibre difficile. Georges

Friedmann avant

la sociologie du travail

8 9 /3 9 9

Bruno WANROOIJ

Zefthe Akaira, o delle identità

smarrite

8 9 /4 0 0

Robert J. GARY-BOBO

On the Existence of Equilibrium

Configurations in a Class of

Asymmetric Market Entry

Games

8 9 /4 0 1

Federico ROMERO

The US and Western Europe:

A Comparative Discussion of

Labor Movements in the

Postwar Economy

8 9 /4 0 2

Stephen MARTIN

Direct Foreign Investment in

The United States

8 9 /4 0 4

Christian JOERGES

Product liability and

product safety in

the European Community

8 9 /4 0 5

Giandomenico MAJONE

Regulating Europe:

Problems and Prospects

8 9 /4 0 6

Fabio SDOGATI

Exchange Rate Fluctuations and

the Patterns of International

Trade: A Study of the Flow

of Trade from Newly

Industrialized Countries to

the European Community at the

Industry Level

8 9 /4 0 7

Angela LIBERATORE

EC Environmental Research and

EC Environmental Policy:

A study in the utilization of

knowledge for regulatory

purposes

8 9 /4 0 8

J. -Matthias Graf von der

SCHULENBURG

Regulation and Deregulation of

Insurance Markets in the

Federal Republic of Germany

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Examples from Europe

8 9 /4 1 0

Léonce BEKEMANS/ Manfred

GLAGOW/Jeremy MOON

Beyond Market and State

Alternative Approaches to

Meeting Societal Demands

8 9 /4 1 1

Erich KAUFER

The Regulation of Drug

Development: In Search of a

Common European Approach

8 9 /4 1 2

Gianna GIANNELLI/ Gosta

ESPING-ANDERSEN

Labor Costs and Employment in

the Service Economy

8 9 /4 1 3

Francisco S. TORRES

Portugal, the EMS and 1992

Stabilization and Liberalization

8 9 /4 1 4

Gosta ESPING-ANDERSEN/

Harald SONNBERGER

The Demographics of Age in

Labor Market Management

8 9 /4 1 5

Fritz von NORDHEIM NIELSEN

The Scandinavian Model:

Reformist Road to Socialism or

Dead End Street?

Exchange-Rate Variability:

The presumed Inherent

Instability of the Multiple

Reserve-Currency System

8 9 /4 1 7

Jose P. ESPERANQA/ Neil KAY

Foreign Direct Investment and

Competition in the Advertising

Sector: The Italian Case

8 9 /4 1 8

Luigi BRIGHI/ Mario FORNI

Aggregation Across Agents in

Demand Systems

8 9 /4 1 9

Hans Ulrich JESSURUN

d'OLIVEIRA

Nationality and Apartheid:

Some Reflections on the Use of

Nationality Law as a Weapon

against Violation of

Fundamental Rights

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