4 - Search for Stability: Siemens in Inter-war-Period Japan

Summary

INTRODUCTION

PRIOR TO THE Second World War, foreign direct investments by German companies in Japan were mostly aimed at establishing sales and distribution organization, with only a small portion going to local production. Investment made by Siemens, a giant electrical engineering company, was the largest one made for local production. The company established Fuji Electric Manufacturing Co. Ltd as a joint venture with the Furukawa business group.

Siemens started its business activities in Japan at an early stage. Export activities began in the 1860s. Siemens was exporting various types of products, from heavy electric machinery to light electric appliances. For this reason, sales agencies were first set up in Japan, and local affiliates were established after that. A plan to make direct investments in Japan to set up local production had already been put in place before the First World War. Local production then entered its initial stage.

But the plan by Siemens to make direct investments in Japan materialized in earnest only after the First World War. Competition among foreign and Japanese companies on the Japanese market intensified under conditions in which, spurred by the First World War, electric machinery companies experienced further development, trade practices were again relaxed, and capital liberalization policies continued to be implemented in Japan. Confronted by this situation, on August 22, 1923, Siemens established Fuji Electric as a joint venture with Furukawa Electric Industry, which was a member of the Furukawa business group.

The aim of this paper is to discuss the position Siemens occupied in Japan as a multinational enterprise operating in a dictatorial environment, and to determine how Siemens perceived this environment, what strategies it developed, what types of structures it put in place, how it developed its business, and what results it ultimately achieved.

PRELIMINARY CONSIDERATIONS

Before delving into this case any further, I would like to put forth some preliminary considerations regarding the issues covered in this workshop.

First, we need to establish the facts concerning the direct investments made by Western companies in Japan during the inter-war period.

Increased foreign direct investment in Japan is a relatively recent phenomenon, and the investments existing prior to the Second World War were extremely modest by modern standards.