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Origins of United States Direct Investment in France*

Published online by Cambridge University Press:  11 June 2012

Charles P. Kindleberger
Charles P. Kindleberger
Affiliation:
Professor of Economics, Massachusetts Institute of Technology
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Abstract

Most analyses of American direct investment abroad focus on the post-World War II era, and on manufacturing. Professor Kindleberger examines United States direct investment in a range of undertakings in France — finance, insurance, trade, marketing, services, and manufacturing — and concentrates on pre-1950 developments.

Type
Research Article
Information
Business History Review , Volume 48 , Issue 3: Multinational Enterprise , Autumn 1974 , pp. 382 - 413
Copyright
Copyright © The President and Fellows of Harvard College 1974

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References

1 La Documentation Française, “Aperçu sur les investissements Américains en France,” Notes et études documentaires, No. 3770, 15 Mars 1971, 3; and “Les Sociétés internationales,” Notes et études documentaires, No. 3709–3710, 20 Juillet 1970, 40

2 General concern about American investment is recorded first in Britain in 1900; see McKenzie, Fred A., The American Invaders: Their Plans, Tactics and Progress (New York, 1901)Google Scholar, and Thwaite, B. H., The American Invasion: England's Commercial Danger (Wil-mington, N.C., 1902).Google Scholar German anxiety over Ueberfremdung — excessive domination of industry by foreign ownership — was recorded as early as 1852, when Gustav Meissen complained about British, Belgian, and especially French ownership of Rhineland mines. German irritation over American investment in the electrical industry was expressed in the 1890s. See Benaerts, Pierre, Les origines de la grande Industrie allemande (Paris, 1933), 353.Google Scholar

3 (London, 1958), 17. Dunning is mistaken in giving pride of place to the establishment in 1856 of the North British Rubber Company in Edinburgh by J. Ford of New Brunswick, N.J., for vulcanizing rubber. An earlier manufacturing investment in Britain was the branch plant established by Samuel Colt in London in 1852 to make muskets and pistols with interchangeable parts. This concern was sold to a British purchaser in 1857 at the end of the Crimean War, and failed shortly thereafter. Mira Wilkins' highly useful history of American direct investment [The Emergence of Multinational Enterprise: American Business Abroad from the Colonial Era to 1914 (Cambridge, Mass., 1970)] states that these two failures are exceptional as American direct investments prior to the Civil War. She has not taken account of the still-flourishing Haviland & Co. of 1842 in France, although (as noted below) there is a question whether that qualifies today as an American investment.

4 Redlich, Fritz, “Business Leadership: Diverse Origins and Variant Forms,” Economic Development and Cultural Change, VI (April, 1958), 177–190.CrossRefGoogle Scholar

5 Lévy-Leboyer, , Les banques européenes et l'industrialisation intemationale dans la premiére moitiè du XIXe siècle (Paris, 1964), 432, 436.Google Scholar

6 Ibid., 436; Adressbuch der Kaufleute und Fabrikarten von ganz Deutschland so wie der Haupt-Handels-und Fabrikarte des uebigen Europa unter der andern Welttheile (1828), 9, 19.

The liner service from New York to Le Havre was begun in 1822 by Francis dePau, four years after the initiation of the famous Black Ball Line from New York to Liverpool; Lanier, Henry W., A Century of Banking in New York, 1822–1922 (New York, 1922), 104–105.Google Scholar An American Chamber of Commerce in Le Havre is recorded in this period, but without details; Albion, R. G., The Rise of New York Port, 1815–1860 (New York, 1939), 237.Google Scholar The American Chamber of Commerce established in Paris claims to be the first American Chamber abroad.

7 Hidy, Muriel E., “George Peabody, Merchant and Financier, 1829–1854,” (Ph.D. dissertation, Radcliffe College, 1939), 17, 58.Google Scholar

8 Isabella Pratt Shaw, The Welles Family and Wellesley (n.p., n.d.), 23

9 Ibid., 28, 29.

10 Hidy, “George Peabody,” 84.

11 Lévy-Leboyer, Les banques, 558.

12 Hidy, “George Peabody,” 87.

13 Redlich, Fritz, The Molding of American Banking (New York, 1951), II, 69.Google Scholar

Asa Fitch, Jr., is recorded in Moses Y. Beach's 1846 directory, Wealth and Biography of the Wealthy Citizens of New York City, 6th ed., p. 10, with the statement that he was for a long time a merchant at Marseilles, but was then doing a large commission business with his brother William, in Exchange Place, New York. Since the Beach directory was first produced in 1840 to provide credit information to “bankers, merchants and others” because of the disastrous experiences of 1837, there is a faint suggestion that the Fitch liquidation of the Marseilles house was connected with that panic. The directory gives the wealth of Asa Fitch as $300,000, of William Fitch as $100,000 (reproduced in Lanier, A Century, 151ff).

14 Lévy-Leboyer, Les banques, 559.

15 Hidy, “George Peabody,” 283.

16 Lewis, Cleona, America's Stake in International Investments (Washington, 1938), 193.Google Scholar

17 Foreign Relations of the United States, 1878 (Washington, 1878), 182–184.

18 American Chamber of Commerce in Paris, Americans in France (Paris, 1930).Google Scholar

19 Satterlee, Herbert L., J. Pierpont Morgan (New York, 1939), 150.Google Scholar

20 In Memorian, Jesse Seligman (New York, 1894), 122.

21 Redlich, Molding, II, 367.

22 Hopkinson, Edward Jr., Drexel & Co. (New York, 1952)Google Scholar; Nelson Dean Jay, informal account of the Paris office of Morgan Guaranty Trust Co., typescript in possession of Morgan Guaranty Trust (hereafter cited as Jay typescript); Winkler, John K., Morgan the Magnificent (New York, 1930), 46.Google Scholar

23 Winkler, Morgan the Magnificent, 2.

24 Morgan Guaranty Trust Co., Annual Report, 1967, 10.

A Paris Embassy dispatch to Washington on October 20, 1873, however, noted that after consulting prominent American bankers in the French capital, it could be said that the number of American residents in France “does not increase but rather diminishes” (Foreign Relations of the United States, 1874, 401).

25 Jay typescript, 2.

26 Satterlee, J. Pierpont Morgan, 309, 411.

27 Morgan Guaranty Trust Co., Annual Report, 1967, 10.

28 Jay typescript, 4.

29 In 1899, the American Chamber of Commerce in Paris circulated its 165 members to obtain their opinions on the merits of the U.S. government starting parcel post service between the U.S. and France. Eighty-one replies were received, of which seventy-one were favorable and eight opposed — presumably American Express and the freight forwarders. American Chamber of Commerce, Paris, Minutes, April 5, 1899 (bound manuscript, American Chamber, Paris).

30 Hatch, Alden, American Express: A Century of Service (New York, 1950)Google Scholar; Reed, Ralph T., American Express: Its Origin and Growth (New York, 1952).Google Scholar

31 Seaburg, Carl and Patterson, Stanley, Merchant Prince of Boston: Colonel T. H. Perkins, 1764–1854 (Cambridge, Mass., 1971), 225.CrossRefGoogle Scholar

32 Pearson, Henry Greenleaf, Son of New England: James Jackson Storrow (Boston, 1932), 100.Google Scholar

33 Phelps, Clyde William, Le mouvement de l'extension des banques américaines, à l'étranger et principalement en France (thesis, Toulouse, Imprimerie V. Barnet, 1924), 141.Google Scholar

34 Abrahams, Paul P., “The Foreign Expansion of American Finance and Its Relationship to the Foreign Economic Policies of the United States, 1907–1921,” (Ph.D. dissertation, University of Wisconsin, 1967), 71.Google Scholar

35 Phelps, Le mouvement, 77.

36 Phelps, Clyde William, The Foreign Expansion of American Banks (New York, 1927), 138.Google Scholar

37 Phelps, Le mouvement, 141.

38 Ibid., 34–37.

39 Abrahams, “Foreign Expansion of American Finance,” 84.

40 Phelps, Le Mouvement, 95–96.

41 Ibid., 125–126. The one per mille tax on capital (“centime additionelle à la patente”) was discriminatory in the sense that it applied to total capital of the bank, and not merely to the capital of units in France. Thus the National City Bank paid the tax on a capital of $100,000,000 for the entire bank, when it had only one branch in France, while the Société Générale, with 603 branches in France, paid a similar tax on a similar overall capital sum. In 1924, however, the National City Bank organized as a Societé Anonyme, rather than a branch, and drastically reduced its obligation. Phelps, Foreign Expansion of American Banks, 179.

42 Abrahams, “Foreign Expansion of American Finance,” 24, 40.

43 Koszul, Jacques, “American Banks in Europe,” in Kindleberger, C. P., ed., The International Corporation: A Symposium (Cambridge, Mass., 1970), 285–286.Google Scholar

44 Keller, Morton, The Life Insurance Enterprise, 1885–1910 (Cambridge, Mass., 1964), Part III.Google Scholar

45 Whitcomb, Philip H., Seventy-Five Years in the Franco-American Economy: A Short History of the First American Chamber of Commerce Abroad (Paris, 1970), 13.Google Scholar

46 Southard, Frank A. Jr., American Industry in Europe (Boston, 1931), xiiiGoogle Scholar, lists 1850 as the date Tiffany decided to open a Paris store.

47 Purtell, Joseph, The Tiffany Touch (New York, 1971), 19–24.Google Scholar

48 The history of Tiffany's makes a great deal of an alleged innovation in retail marketing in setting fixed prices, plainly marked on merchandise, concerning which there would be no bargaining, and attributes the immediate success of the Paris store to this technique (Purtell, Tiffany Touch, 18, 24). It may be doubted that fixed prices were original with Tiffany, despite the fact that New York newspapers of 1837 featured the practice in headlines. George Fox, the Quaker, called for it in the seventeenth century, and Josiah Wedgwood applied it in his showrooms in the eighteenth century [Hower, Ralph M., History of Macy's of New York, 1858–1919 (Cambridge, Mass., 1946), 26, 89Google Scholar]. Bon Marché adopted the single price system in 1838, and the growing size of retail establishments made its spread inevitable when the store owner, or a trusted relative, could no longer take time to settle the bargain with each customer. The Tiffany investment was thus not solely or even primarily based on an innovation in retailing, although this store may have extended the system from drygoods to jewelry.

49 Pasdermadjian, H., Le grand magasin (Paris, 1949), passim.Google Scholar

50 Hower, History of Macy's, 73.

51 Resseguie, Harry E., “Alexander Tumey Stewart and the Development of the Department Store,” Business History Review, XXXIX (Autumn, 1965), 303.Google Scholar

52 Hower, History of Macy's, contains an extended discussion of the question whether Paris or New York deserves the credit for originating the department store, including an appendix (411–416) on “The Rise of the Department Store in Paris.”

53 Resseguie, “Stewart and the Department Store,” 316.

54 Hower, History of Macy's, 110, 242–243. Reference was made to “our Paris house” in the middle 1880s, but this was the buying office of L. Straus, a china-importing firm. Isador Straus (of the importing firm) bought into R. H. Macy & Co. in 1888.

55 Twyman, Robert W., History of Marshall Field, 1852–1906 (Philadelphia, 1954), 99, 178.CrossRefGoogle Scholar

56 Went, Lloyd and Kogan, Herman, Give the Lady What She Wants: The Story of Marshall Field and Company (Chicago, 1952), 99.Google Scholar

57 Twyman, History of Marshall Field, 26–28, 116, 10.

58 Whitcomb, Seventy-Five Years, 13.

59 Resseguie, Harry N., “The Decline and Fall of the Commercial Empire of A. T. Stewart,” Business History Review, XXXVI (Autumn, 1962), 269.Google Scholar

60 Interview, Frederick Haviland, and the pamphlet, Haviland: The History of a Name (n.p., n.d.); see also Whitcomb, Seventy-Five Years, 15.

Like the Welles private bank, there is a question whether Haviland & Co. technically qualifies as a direct investment, since the French owners lived in France, and owned as much of Haviland & Co., Importers of New York, as the latter owned of them. But it falls within the spirit of direct investment.

61 A novel by Chardonne, Jacques, Porcelain de Limoges (Paris, 1936, pp. 83, 93Google Scholar) records trips by a Limoges engineer to America to discuss the technical workings of furnaces and refers to the mail from America.

62 Hower, History of Macy's, 212, 246.

63 Custom House Justice and Haviland China (New York, 1907), 12, 33.

64 Interview with Frederick Haviland.

65 Resseguie, “Stewart and the Department Store,” 319; Hower, History of Macy's, 163.

66 Resseguie, “Decline and Fall of Stewart,” 269.

67 Hower, History of Macy's, 110.

68 U.S. Department of Commerce, Trade Information Bulletin No. 731 (Washington, 1931), 32.

69 American Chamber of Commerce in Paris, List of American Firms in France (Paris, 1972), 12.Google Scholar

70 Kindleberger, Charles P., Economic Growth in France and Britain, 1851–1950 (Cambridge, Mass., 1964), 148ff.CrossRefGoogle Scholar

71 Cited in Davies, Robert B., “‘Peacefully Working to Conquer the World’: The Singer Manufacturing Company in Foreign Markets, 1854–1889,” Business History Review, XLIII (Autumn, 1969), 306.Google Scholar

72 Current, Richard N., The Typewriter and the Men Who Made It (Urbana, Ill., 1954), 85, 103.Google Scholar

73 The Sales Strategy of John H. Patterson, Founder of the National Cash Register Company (Chicago and New York, 1932), 330.

74 Crowther, Samuel, John H. Patterson, Pioneer in Industrial Welfare (Garden City, N.Y., 1926), 268, 273.Google Scholar

75 Ackerman, Carl, George Eastman (Boston, 1930), 172.Google Scholar

76 An Essay in Trade and Transformation (New York, 1961), passim.

77 Yost & Co. early got the domestic (but not foreign) rights to the Sholes and Glidden typewriter, which ultimately became the Remington, but later Yost & Co. gave it up and started its own company in 1880. Current, The Typewriter, 78, 98. Little more is readily available about this company, and nothing about Jewitt.

78 Edwards, William B., The Story of Colt's Revolver (Harrisburg, Pa., 1953), 255Google Scholar; Hutchinson, William T., Cyrus Hall McCormick (New York, 1930), I, 404Google Scholar; Rywell, Martin, Samuel Colt: A Man and an Epoch (Harriman, Tenn., 1952), 127.Google Scholar

79 Hutchinson, Cyrus McCormick, II, 415.

80 Ibid., II, 685.

81 Davies, “‘Peacefully Working,’” 303; Wilkins, Emergence of Multinational Enterprise, 38–39, 42.

82 Seventy-Five Years, 15.

The Vaupel & Curhan compilation [Vaupel, James W. and Curhan, Joan P., The Making of Multinational Enterprise: A Source Book of Tables Based on the Study of 187 Major U.S. Manufacturing Corporations (Boston, 1969)Google Scholar] gives the date of Singer's founding in France as 1907, the method as “subsidiary formed” and the activity as sales, with a manufacturing subsidiary formed only in 1957. The American Chamber of Commerce List gives the date of establishment as 1872.

83 Prout, Henry G., A Life of George Westinghouse (New York, 1921), 269.Google Scholar

84 Exact dating of an initial manufacturing investment is difficult for the reasons illustrated in the preceding footnote. The Vaupel and Curhan compilation for 187 leading companies of 1967 and the American Chamber of Commerce List of 1972, covering 675 American branch, subsidiary, or affiliated companies in France (out of 1,000) are incomplete in coverage of existing firms at the time, and of course of firms that no longer exist or no longer maintain foreign investments. In addition, questionnaires are not always unambiguous and respondents can become confused in interpreting. In the American Chamber of Commerce List, “date of establishment” is sometimes given for the French subsidiary prior to acquisition or takeover, for transfer to the parent at time of reorganization or change of name. A further ambiguity inheres in the case of discontinuous investments. Vaupel and Curhan, moreover, ask for exact years only after 1900. The best general statement is, of course, Wilkins, Emergence of Multinational Enterprise. Appendix 1 presents as accurate a picture as can be drawn from secondary sources of companies by date of investment, according to broad classes.

85 Wilkins, Emergence of Multinational Enterprise, 212.

86 Tymeson, Mildred McClary, The Norton Story (Worcester, Mass., 1953), 171–172.Google Scholar

87 Ford later twice bought up manufacturing, as opposed to assembly facilities, before finally selling off its Simca holding to Chrysler. It never made a profit in France. And General Motors, especially its 1920 vice president for Europe, who later went to Ford, never thought France a good risk. Wilkins, Mira and Hill, Frank Ernest, American Business Abroad: Ford on Six Continents (Detroit, 1964), 367.Google Scholar

88 Ibid., 97; Sloan, Alfred P. Jr., My Years with General Motors (Garden City, New York, 1964), 317.Google Scholar

89 An earlier outburst against United States investment, prior to 1929–1930, occurred in 1923, when German interests were bought up with dollars during the hyper-inflation. This is a classic example of “market failure,” like the carpetbaggers at the end of the American Civil War. See also Southard, American Industry in Europe, 178, 226–227, 44; Hamberg, Octave, L'Impérialisme Américaine (Paris, 1929)Google Scholar; and Bonnefon-Craponne, Jean, La pénétration économique et financière des capitaux américains en Europe (Paris, 1930).Google Scholar

90 Letter to the author, November 3, 1972.

91 Wilkins and Hill, American Business Abroad, 66.

92 Lewis, America's Stake, 303.

93 Southard, American Industry in Europe, 118.

94 See Ralph W. and Hidy, Muriel E., Pioneering in Big Business, 1882–1911: History of the Standard Oil Company (New Jersey) (New York, 1955)Google Scholar, and Gibb, George S. and Knowlton, Evelyn, The Resurgent Years, 1911–1927: History of the Standard Oil Company (New Jersey) (New York, 1956).Google Scholar

95 Gibb and Knowlton, Resurgent Years, 510.

96 Gervais, Jacques, La France face aux investissements étrangers, analysé par secteurs (Paris, 1963), 138.Google Scholar

97 Letter to the author from Dun & Bradstreet, International.

98 American Chamber of Commerce, Paris, Minutes. After some hesitation, the Chamber agreed to the exchange, despite the fact that it was contrary to its practice, because there was need for the information. It accepted the offer on a non-exclusive basis, but refused to take responsibility for the accuracy of the information.

99 Interview with Charles Torem.

100 fhe first president, Dr. Stephen H. Tyng, represented one of the insurance companies. He had been a chaplain in the Civil War in the United States, but resigned from the church over “many vexatious controversies” in religion. American Chamber of Commerce, Minutes, November 18, 1899.

101 Herald, George W. and Radlin, Edward D., The Big Wheel (New York, 1953), 63–65.Google Scholar

102 American Chamber of Commerce in Paris, List.

103 Ibid.

104 Bacon, , “American International Indebtedness,” Yale Review, IX (November, 1900), 265–285Google Scholar; Osborne, , “Protection of American Commerce Abroad,” North American Review (May, 1912), 673–690.Google Scholar Bacon (276) excludes the $45,000,000 of reserves of foreign securities held by the life insurance companies against their liabilities. He makes no mention of direct investment. Keller, Life Insurance Enterprise, 89, gives an estimate of $15,000,000 of European securities owned by United States investors in 1899, apart from the life insurance reserves.

105 Dickens, American Direct Investment, 37.

106 Ibid., 10.

107 In 1929 and 1936, United States subsidiaries in France were distinctly smaller than those in Britain or Germany:

Source: Dickens, American Direct Investment, 10; and Dickens, Paul D., American Direct Investment in Foreign Countries, 1936 (Washington, Department of Commerce, Economic Series No. 1, 1938), 3.Google Scholar

108 U.S. Department of Commerce, Office of Business Economics, Balance of Payments Statistical Supplement (Washington, 1958), passim.Google Scholar

109 Gervais, La France face aux investissements étrangers, 53, 54.