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Organizational Innovation in Nineteenth-Century Railway Investment: Peripheral Countries in a Global Economy

Published online by Cambridge University Press:  08 January 2015

Álvaro Silva
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Abstract

The relationship between ownership and control of distant ventures has been a major topic in business history. This relationship prompted the creation of a specific organizational form, the freestanding company, particularly active in international business before World War I. The freestanding form and railway companies such as Companhia Real share the common characteristic of being stand-alone firms based on foreign direct investment (FDI), but their legal ownership and management strategy were different. The freestanding companies offshored legal ownership; Companhia Real offshored top management since it was incorporated in the country hosting FDI. This business configuration was usual in French investments across European peripheral countries. This article introduces a new concept into the current international business literature, emphasizing the polymorphous character of foreign investment before World War I.

Type
Research Article
Information
Business History Review , Volume 88 , Issue 4 , Winter 2014 , pp. 709 - 736
Copyright
Copyright © The President and Fellows of Harvard College 2014 

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27 I am particularly indebted to two referees' comments in the clarification of these differences.

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29 Ibid., 41.

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37 Also in other railway companies, where Camondo and CRCFP's Spanish shareholders had interests: Sociedade de Caminhos de Ferro Madrid-Cáceres-Portugal (MCP) and Andaluces.

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46 Meeting of the Committee, 12 Dec. 1876, which tackles this theme for the first time. The meetings of the Committee on February 14 and March 7, 1877 analyzed the different components of this strategy; CP FMNF.

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50 As an example, meeting of the Committee, 14 Oct. 1880, CP FMNF. Examples of loans to other firms: the Companhia del Tajo, as well as Companhia Malpartida-Cáceres (meeting of the Committee, 18 Jan. 1881); see Committee of Paris, Contracts (1876–1883), PT/FMNF/CCFP-PT/A/3/016 and 022 and PT/FMNF/CCFP-PT/A/3/02 to 07, FMNF.

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67 It happened on several occasions, even before the crisis. Between 1871 and 1881 these operations accounted to 1.8 billion réis. Salgueiro, A Companhia Real, 52. But after 1885 these loans became more frequent and large (see meeting of the board, Lisbon, 10 Sept. 1885 and 16 June 1886, CP FMNF).

68 Meeting of the board, Lisbon, 23 June 1887, CP FMNF.

69 Meeting of the board, Lisbon, 3 Aug. 1887, CP FMNF.

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74 Meetings of the board (Lisbon) from Sept. 1890 to June 1891, CP FMNF. The burden of debt comes from Pinheiro, Chemins de fer, 495.

75 Fernandes, O poder oculto.

76 Esteves, “Finanças Públicas.”

77 In Paris, the Économiste français (25 Nov. 1893) urged naval blockade of the ports of Lisbon and Porto in order to force the Portuguese government to pay CRCFP and state bondholders.

78 Wilkins, “The Free-Standing Company Revisited,” 8.

79 Ibid., 13.

80 The French Commission des Values Mobilières, created in 1872 to tax foreign securities, considered CRCFP as a Portuguese company. The author thanks Rui Pedro Esteves for this information.

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89 Wilkins, “The Free-Standing Company,” 261.

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