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Japanese Multinational Enterprise before 1914

Published online by Cambridge University Press:  11 June 2012

Mira Wilkins
Mira Wilkins
Affiliation:
Mira Wilkins is professor of economics atFlorida International University
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Abstract

The current scholarly interest in contemporary Japanese businesses has somewhat obscured their equally fascinating early historical development. In this article, Professor Wilkins emphasizes both the extent and the variety of Japanese multinational enterprise before the First World War, and offers a basis for comparing its differences and similarities with the conventional American model.

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Articles
Information
Business History Review , Volume 60 , Issue 2 , Summer 1986 , pp. 199 - 231
Copyright
Copyright © The President and Fellows of Harvard College 1986

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References

1 Wilkins, Mira, The Emergence of Multinational Enterprise. American Business Abroad from the Colonial Era to 1914 (Cambridge, Mass., 1970)Google Scholar, and Wilkins, , The Maturing of Multinational Enterprise: American Business Abroad from 1914 to 1970 (Cambridge, Mass., 1974)CrossRefGoogle Scholar; Stopford, John M., “The Origins of British-Based Multinational Manufacturing Enterprise,” Business History Review 48 (Autumn 1974): 303–56CrossRefGoogle Scholar; Franko, Lawrence G., The European Multinationals (Stamford, Conn., 1976)Google Scholar; Wilkins, Mira, “Modern European Economic History and the Multinationals,” Journal of European Economic History 6 (Winter 1977): 575–95Google Scholar. Raymond Vernon's Harvard project on foreign multinationals paid special attention to the history of European business abroad. Recently, there has been a proliferation of interest in the history of European multinational enterprise. Much of the newer work has been surveyed in Mira Wilkins, “The History of European Multinationals—A New Look,” Journal of European Economic History, forthcoming. Alfred D. Chandler, Jr., has in process a major work that will encompass the history of both American and European multinational enterprise.

2 Included among the best works on post-Second World War Japanese multinationals are Yoshino, M. Y., Japan's Multinational Enterprises (Cambridge, Mass., 1976)Google Scholar; Tsurumi, Yoshi, The Japanese Are Coming (Cambridge, England, 1976)Google Scholar; Kojima, Kiyoshi, Japanese Direct Foreign Investment (Tokyo, 1978)Google Scholar; and Ozawa, Terutomo, Multinationalism, Japanese Style (Princeton, N.J., 1979)Google Scholar. Nobuo Kawabe's work on the history of Japanese multinationals was unique. His Ph.D. dissertation at Ohio State (1980) was on Mitsubishi Shoji Kaisha's pre-Second World War history in the United States; he has published a revision in Japanese. He continues to pursue research on the history of Japanese multinationals. More recently, there have been the innovative articles in Overseas Business Activities, ed. Okochi, Akio and Inoue, Tadakatsu (Tokyo, 1984)Google Scholar. See also Wilkins, Mira, “American-Japanese Direct Foreign Investment Relationships, 1930–1952,” Business History Review 56 (Winter 1982): 497–518CrossRefGoogle Scholar. Unquestionably, however, the most outstanding contribution in recent years relevant to the history of early Japanese multinational enterprise is Wray, William D., Mitsubishi and the N.Y.K., 1870–1914: Business Strategy in the Japanese Shipping Industry (Cambridge, Mass., 1984)CrossRefGoogle Scholar. At the University of Bradford in England, Hafiz Mirza is preparing a Ph.D. dissertation on pre-Second World War Japanese overseas investments.

3 Most current discussions of multinational enterprise include more than manufacturing. Thus, for example, The Growth of International Business, ed. Casson, Mark (London, 1983)Google Scholar has a chapter on the growth of transnational banking. The issue of the status of early European trading companies first arose, I believe, at a conference held in Delaware in May 1972 on the evolution of international management structures. Wilkins, The Emergence of Multinational Enterprise, 3, begins with a discussion of early trading companies. Some of the first textbooks on multinational enterprise began with brief historical reviews, including materials on these European enterprises. See, for example, Robinson, Richard D., International Business Policy (New York, 1964)Google Scholar.

4 Ozawa, Multinationalism, 31, noted that in 1976, the first five of Japan's top fifty overseas investors were trading companies: Mitsui, Mitsubishi, Marubeni, C. Itoh, and Sumitomo. I have borrowed the concept of layering from Braudel, Fernand, Afterthoughts on Material Civilization and Capitalism (Baltimore, 1977)Google Scholar. Lest one think in a parochial manner that the Japanese trading company is sui generis in the modern world, the reader should consult Chalmin, Philippe, Negoçiants et Chargeurs, 2d ed. (Paris, 1985)Google Scholar.

5 Beginning with Stephen Hymer's 1960 MIT dissertation, published as The International Operations of National Firms (Cambridge, Mass., 1976)Google Scholar, many economists have studied the theory of multinational enterprise in the context of industrial organization theory and oligopolistic behavior. Since most of the industries in which American multinational enterprises were active seemed characterized by a market structure that involved relatively few large firms, it came to be assumed that this was true of multinational enterprises in general. The very influential “product cycle” theory of multinationals, developed by Raymond Vernon and Louis Wells, in its early renditions began with advantages (principally technological advantages) held by American manufacturing firms. For the current state of multinational enterprise theory, see, for example, Caves, Richard, Multinational Enterprise and Economic Analysis (New York, 1983)Google Scholar and the charming essay by Kindleberger, Charles, “Plus çà change—A Look at the New Literature,” in his Multinational Excursions (Cambridge, Mass., 1984), 180–88Google Scholar. Even the British scholars, including John Dunning, assumed the applicability of an “American model.” I have barely touched on the exciting work that is being done on the theory of multinational enterprise.

6 Raymond Vernon's large-scale study of multinational enterprise began at Harvard in the 1960s with American business abroad; by the 1970s he was asking identical questions of European and Japanese enterprises, and then his students were discussing the same issues in terms of the Third World multinationals.

7 For example, on the history of American international business, see Wilkins, Mira and Hill, Frank Ernest, American Business Abroad: Ford on Six Continents (Detroit, 1964)Google Scholar; Wilkins, Emergence of Multinational Enterprise; Wilkins, Maturing of Multinational Enterprise; Chandler, Alfred D. Jr,The Visible Hand: The Managerial Revolution in American Business (Cambridge, Mass., 1977)Google Scholar. On European international business, see Stopford's and Franko's work, cited in note 1 above. The influence of the American experience was evident at a conference on “European Multinational Enterprise: Theory and History,” held in Florence in 1983; some of the papers given there have been published as Multinational Enterprise: Theory and History, ed. Hertner, Peter and Jones, Geoffrey (Aldershot, 1986)Google Scholar. See Franko, European Multinationals, on variations; other variations have been suggested—for example, that European investors were more prone to joint ventures—but systematic historical analysis of the differences does not exist. Vernon, Raymond, Two Hungry Giants (Cambridge, Mass., 1983), 12 (the quotation)CrossRefGoogle Scholar.

8 Kojima, , Japanese Direct Foreign Investment, and his Japan and a New World Economic Order (Tokyo, 1977)Google Scholar. From a historical standpoint, I do not see evidence to substantiate Kojima's differentiation; early U.S. multinationals were clearly trade-creating. Nakagawa's statement is in Okochi and Inoue, Overseas Business Activities, 62. In a forthcoming article in the Journal of European Economic History, I question whether an identical model—without modifications—can be used to study the history of American multinational enterprises and those headquartered in various different Western European countries. That article seeks to delineate some of the differences (other than those based on comparative advantage) in the evolution of American and European multinational enterprise and to clarify what seemed distinctive about the American environment that in a special manner had shaped U.S. multinational enterprise growth. Wilkins, “History of European Multinationals.”

9 Anonymous critic. Almost a decade ago, I gave a paper at a business history conference on asymmetry in foreign direct investment. Wilkins, , “Crosscurrents: American Investments in Europe, European Investments in the United States,” in Uselding, Paul, ed., Business and Economic History, 2d ser. 6 (1977): 22–35Google Scholar. Historians there made the same comment: why should one assume symmetry? But the literature on multinational enterprise, beginning with Hymer, International Operations of National Firms, has assumed just that; the theory of the oligopolistic behavior of multinationals assumes that, irrespective of home countries, firms in particular industries will be prone to make foreign investments.

10 I was surprised at the extent of Japanese business abroad before 1914 when I started to write this, but became less surprised as I delved deeper. Students of Japanese business history will be less surprised than students of the history of multinational enterprise.

11 Wilkins, “History of European Multinationals.” I could have chosen to discuss in isolation the role of government (more in the Japanese case than in the American) or the role of educational systems (important in both countries). To add these separate categories seemed unnecessary, since they would not alter the basic analysis that follows. Professor Frank H. H. King (historian of the HongKong and Shanghai Banking Corporation), on reading the penultimate draft of this article, presented the stimulating notion that specific Japanese government-inspired national goals should be considered with “special reference to the replication of foreign-type institutions as an end in itself.” (Letter to the author, 4 Oct. 1985.) To incorporate (or to refute) this contention would involve a major revision of this paper. Ultimately, I believe that the Japanese (through imitation and innovation) developed appropriate institutions and that the development of multinationals per se was not in its essence a government-inspired replication of foreign behavior, albeit in some instances—for example, the Yokohama Specie Bank compared with the HongKong and Shanghai Banking Corporation—this may have been a relevant consideration.

12 League of Nations, Industrialization and Foreign Trade (Geneva, 1945), 13Google Scholar; Lockwood, W. W., The Economic Development of Japan (Princeton, N.J., 1954), 89 (1905–9 Japanese figures)Google Scholar. U.S. figures (1905–9 average) from U.S. Bureau of the Census, Historical Statistics of the United States (Washington, D.C., 1960), 7Google Scholar.

13 In studying the history of Japanese business, I have found extremely useful Hirschmeier, Johannes and Yui, Tsunehiko, The Development of Japanese Business 1600–1973 (Cambridge, Mass., 1975)Google Scholar.

14 As Maddison, Angus, Economic Growth in Japan and the USSR (New York, 1969), 28Google Scholar, points out, as late as 1887, nine-tenths of Japan's external trade was handled by foreigners—mainly British houses. Yet, the Japanese replaced them and as trade expanded, Japanese firms handled the bulk of it. Wray, Mitsubishi and N.Y.K., 20, suggests that foreign shipping companies in the early 1870s were a threat to Japan's economic security because they exacerbated Japan's balance of payments difficulties by carrying all its foreign trade; but this was true of many countries that failed to make the transition from foreign to domestic control.

15 The British problems with management over distance will be discussed in my forthcoming history of foreign investment in the United States. Large British trading companies of the late nineteenth and early twentieth century included firms such as Jardine. Matheson & Company, Butterfield & Swire, and Balfour, Williamson. Some American companies of this sort, such as the American Trading Company, existed in this era, but they seemed dwarfed by their British counterparts.

16 Wilkins, “History of European Multinationals”; Wilkins, The Emergence of Multinational Enterprise.

17 See Moulton, Harold, Japan (Washington, D.C., 1931), 391–92Google Scholar; on my Japanese trip in July 1984, I tried to obtain the originals of the Moulton figures. Professor Hiroaki Yamazaki of the Institute of Social Science, University of Tokyo, discovered that the Bank of Japan had prepared these figures at Moulton's special request and hand-delivered them to him in the United States. The figures in Ken-ichi Yasumuro, “The Contribution of Sogo Shosha to the Multinationalization of Japanese Industrial Enterprises in Historical Perspective,” in Okochi and Inoue, Overseas Business Activities, 84, should be compared with Remer, C. F., Foreign Investments in China (New York, 1933), 446Google Scholar (a different rate of exchange altered these numbers slightly), and Moulton, Japan, 391.

18 I used the gross national product figure in current prices (4,665 million yen) as given in Ohkawa, Kazushi and Rosovsky, Henry, Japanese Economic Growth (Stanford, 1973), 278Google Scholar. At the rate of exchange used in the tables, that equals about $2.3 billion. By way of comparison, U.S. investment abroad (direct and portfolio investment) in 1914 was $3.5 billion; as a percentage of the American GNP of $36.4 billion in 1914, it equaled 9.6 percent. Based on data in Wilkins, Emergence of Multinational Enterprise, 201. Thus, in 1914, even using the lowest Japanese figure, the Japanese foreign investment was relatively larger than that of the United States. Japanese GNP was smaller in 1914 than in 1913. In 1913 it was 5,212 million yen (or about $2.57 billion). Ibid. When I calculated the Japanese foreign investment estimates as a percentage of the higher 1913 GNP, the figures still came out surprisingly big: 8.8 to 11.5 percent of the GNP.

19 Remer, , Foreign Investments in China, and Chi-ming Hou, Foreign Investment and Economic Development in China 1840–1937 (Cambridge, Mass., 1965)Google Scholar are the basic works on foreign investment in China. See also Tien-yi Yang, “Foreign Business Activities and the Chinese Response, 1842–1937,” in Okochi and Inoue, Overseas Business Activities, 215–25. On Japanese investments in China everyone has to start with Remer, Foreign Investments in China, 414–46, 474–92, and passim. Hou, Foreign Investment, 19, calculated that 36 percent of the total Japanese direct investment in China in 1914 was in transportation, chiefly in the South Manchurian Railway. Remer did not differentiate between investments made by Japanese firms headquartered in Japan and by Japanese residents in China; a student of multinational enterprise would do so.

20 Chao, Kang, The Development of Cotton Textile Production in China (Cambridge, Mass., 1977), 115–16CrossRefGoogle Scholar, notes that the second British-owned mill was called Laou Kung Mow Cotton Spinning Company; the American one was that of the International Cotton Manufacturing Company; and the German-owned one was built by Soy Chee Spinning Company. See an interesting article on the cotton-spinning industry in Shanghai, in The Times (London), 11 Feb. 1896Google Scholar.

21 Kuwahara, Tetsuya, “The Business Strategy of Japanese Cotton Spinners: Overseas Operations 1890 to 1931,” in Okochi, Akio and Yonekawa, Shin-ichi, The Textile Industry and its Business Climate (Tokyo, 1982), 140Google Scholar; interestingly, Chapman, S. D., “British-Based Investment Groups before 1914,” Economic History Review, 2d ser. 38 (May 1985): 234CrossRefGoogle Scholar, writes that Jardine, Matheson had built its cotton spinning mill in Shanghai “to meet incipient Japanese competition.” The article in the London Times, 11 Feb. 1896, evaluates the Japanese entry plans and suggests an added reason why a Japanese firm in China might not succeed: inland taxes on raw cotton.

22 Yasumuro, “The Contribution.” 67, and Feuerwerker, Albert, China's Early Industrialization (Cambridge, Mass., 1958), 224CrossRefGoogle Scholar. Chao, Development of Cotton Textile Production, 116, appears to mix up Mitsui and Mitsubishi. Data from Professor Kuwahara, 16 Jan. 1986, and from Professor Yasumuro, Osaka, 24 July 1984; Chao, Development of Cotton Textile Production, 138, shows Shanghai Cotton's profitable performance.

23 Kuwahara, “The Business Strategy,” 140; the Japan Cotton Trading Company had established its first branch in China in Shanghai in 1903; Mitsui & Co., The 100 Year History of Mitsui & Co., Ltd. 1876–1976 (Tokyo, 1977), 64Google Scholar. Yasumuro. “The Contribution,” 68; Kuwahara, Tetsuya, “The Formation of Oligopolistic Structures of the Cotton Spinning Industry in Japan and the Growth Strategies of the Late-comers: Case of Naigaiwata Company,” Japan Business History Review 18 (Jan. 1984): iii–ivGoogle Scholar; Kuwahara, “The Business Strategy,” 158; and data from Professors Yasumuro and Kuwahara, Osaka, 24 July 1984, on the Naigaiwata Company.

24 Mitsui & Co., of course, had close connections with the Osaka Spinning Mills. Takashi Masuda of Mitsui & Co. in 1879 had prompted the plans for this modern establishment; Masuda became a chief shareholder of the Osaka Spinning Mills; and Mitsui & Co. had the responsibility for importing spinning machines. See Mitsui & Co., 100 Year History, 44–47. Mitsui & Co.'s relations with other spinners appear to have related to raw cotton sales. Nonetheless, Mitsui & Co. cannot be called “a spinning company” in the same manner as the Naigaiwata Company. For the ten largest cotton spinners in Japan in 1913 see S. Yonekawa, “The Growth of Cotton Spinning Firms,” in Okochi and Yonekawa, The Textile Industry, 8. The Naigaiwata Company is not included. I am indebted to Professor Yamazaki (22 July 1984) for finding the Naigaiwata ranking for me. Ranked by total assets, only three other Japanese cotton spinners were larger. None of the latter, in 1914, had investments in Chinese spinning.

25 Kuwahara, “The Business Strategy,” 158, 165; M. Miyamoto, “Comments,” in Okochi and Inoue, Overseas Business Activities, 172; Yamazaki in conversation with the author, Tokyo, 19 July 1984.

26 Thomas, Stephen C., Foreign Intervention and China's Industrial Development, 1870–1911 (Boulder, Colo., 1984), 150–51Google Scholar.

27 Mitsui & Co., 100 Year History, 47. China had been an importer of raw cotton, but from roughly 1888 to the time of the First World War it was a net exporter of raw cotton; coincidentally, it was an importer of cotton yarn and cotton cloth. Reynolds, Bruce L., “The East Asian ‘Textile Cluster’ Trade, 1868–1973: A Comparative Advantage Interpretation,” in America's China Trade in Historical Perspective, ed. May, Ernest R. and Fairbank, John K. (Cambridge, Mass., 1986), 137Google Scholar. The Japanese trade in cotton manufactures came to be very important. In 1913 exports of cotton manufactured goods and yarn totaled 33.9 percent of Japanese exports to China and 11.7 percent of total Japanese exports. Remer, Foreign Investments in China, 462.

28 Thomas, Foreign Intervention, 151.

29 Chao, Development of Cotton Textile Production, 140; Chao, p. 157, presents production cost data for Chinese and Japanese mills in China for 1935. Japanese management had obtained remarkably lower costs than the Chinese. Regrettably, similar comparative data are not available for 1913–14, but see Kuwahara, “The Business Strategy,” 165, which indicates that in 1913 Naigaiwata's Shanghai mills produced 1.24–1.32 pounds of 16-count yarn per spindle each 24-hour day, while the Chinese mills produced 0.87–1.00 pound.

30 Hou, Foreign Investment, 88; Chao, Development of Cotton Textile Production, 117, 301, 305. Hou's breakdowns are by spindles and looms rather than by company. Chao (p. 301) shows the rapid rise of Japanese-owned spindles, 1902–13. He notes that the looms were “power looms” (p. 305), but not whether they were of Western or Japanese design. Ibid. (“Western” includes British, German, and American). Kuwahara—using Minejiro Yoshida, Zaishi Hojin Boseki no Shōrai ni tsuite (1927) as a source—has established that the 886 Japanese-owned looms in Shanghai Cotton Manufacturing Company's mill no. 1 and mill no. 2 were of British manufacture—by Platt Bros.

31 All the sources stress that these early Japanese investments in manufacturing were small compared with what followed. For the first time, in 1919 Japanese-owned cotton spindles in China exceeded those in all Western-owned mills. By 1936, roughly 44 percent of the cotton spindles in China were in Japanese-owned mills. See Chao, Development of Cotton Textile Production, 125–29, 301–2. On looms, ibid., 125–29, 305–7. Remer, Foreign Investments in China, 497, gives slightly different figures for 1909–31 but documents the same formidable expansion in Japanese involvement in spinning. See also Kuwahara, “The Business Strategy,” 141–60. Profit figures provided in Chao, Development of Cotton Textile Production, 138, seem to show larger profits for Shanghai Cotton than for Naigaiwata, but none of the years monitored coincide and the 1908 results for Naigaiwata were before its mill was built.

32 Feuerwerker, Albert, “The Chinese Economy, ca. 1870–1911,” Papers in Chinese Studies (Ann Arbor, Mich., 1969), 34Google Scholar. These figures should be compared with data in Remer, Foreign Investments in China, 431. Remer identified 63 “Japanese” manufacturing “plants or firms” in China in 1914, all of which appear to have been inaugurated after 1900; see ibid., 419. It is not clear how Feuerwerker defined “foreign.” Does he include resident Japanese investors in China? As noted, Remer did. Economists would predict that British enterprises in China would employ relatively more capital than the Japanese ones; after all, Britain was in these years a capital-rich economy, relative to Japan. Remer, Foreign Investments in China, 431, is a good starting point for further study, even though he did not differentiate nonresident and resident foreign investment. See Hou, Foreign Investment, 11, for a good discussion of Remer's methodology; ibid., 89, 246, and Reiner, Foreign Investments in China, 500, on the flour mills. Remer wrote that the oldest flour mill in China was probably the Mitsui mill at Shanghai. He does not give a date of origin, but obviously it preceded the Japanese-owned South Manehuria Milling Company at Tiehlin in Manchuria, which was founded in 1906; ibid.

33 Lindgren, Håkan, Corporate Growth: The Swedish Match Industry in Its Global Setting (Stockholm, 1979), 53–54Google Scholar and Modig, Hans, Swedish Match Interests in British India during the Interwar Years (Stockholm, 1979), 41–45Google Scholar. Remer, Foreign Investments in China, 431. Since Remer did not differentiate between nonresident and resident foreign investments, these may have been small plants run by Japanese businessmen who lived in China. It was not all “cottage” industry in Japan. Modig, Swedish Match Interests, 41–42, cites an “eye-witness” report of 1910 on the Japanese match industry, which indicated that the Japanese had to a large degree adopted the German system of match making; the Japanese built machinery

which imitate the German but with some small alterations, in order that the patent law is not infringed. The appearance of the machines and the manufactures does not completely come up to the German standard but they only cost from a third to a quarter as much as the German machines. As far as possible wood is used in the Japanese machines instead of iron. … A Japanese factory works as far as possible without expensive and continuous machines but uses instead homemade machines often constructed by the factory manager.

Japanese matches before the First World War were “a good third cheaper wholesale than the Swedish”; ibid., 43. One wonders whether Mitsui had match factories in China. Mitsui Bussan made volume purchases from domestic producers and well before 1914 had established a trademarked Japanese match export business. Wray, Mitsubishi and the N.Y.K., 450. In the mid-1920s Mitsui Bussan controlled the greater part of Japanese match exports. Lindgren, Corporate Growth, 338. By 1922, in response to Indian tariffs, unspecified “Japanese interests” in partnership with Indian wholesalers had started to manufacture matches in India; the splints and boxes were imported. See Modig, Swedish Match Interests, 76, 66. On the expansion of Japanese-owned match factories in the Bombay area in 1923, see ibid., 79.

34 Wray, Mitsubishi and the N.Y.K., 395; Remer, Foreign Investments in China, 104, 507–8. Particularly useful on Japanese interests in the Hanyehping Company is William D. Wray, “Japan's Big Three in China: International Business and Changing Industrial Structure,” unpub. paper (Feb. 1986), 23–26. See Sun, Kungtu C., The Economic Development of Manchuria (Cambridge, Mass., 1969), 65Google Scholar, on the Fushun coal mines.

35 Yang, “Foreign Business,” 222–23. Hirschmeier and Yui, Development of Japanese Business, 183, call the Yokohama Specie Bank a “special bank established under government auspices.” Allen, G.C., A Short Economic History of Modern Japan (London, 1962), 53Google Scholar. describes the Yokohama Specie Bank's operations as “from the beginning closely supervised by the government. The state provided one-third of its initial capital and the appointment of its President and Vice-President required the authorization of the Ministry of Finance. The Yokohama Specie Bank was entrusted with funds from the Treasury Reserve Fund to enable it to deal in foreign bills of exchange. …” As of June 1913, the “Imperial Household” owned 121,000 shares of the 480,000 shares issued. Stock Exchange Official Intelligence, 1914 (London), 419Google Scholar. Patrick, Hugh, “Japan 1868–1914,” in Banking in the Early Stages of Industrialization, ed. Cameron, Rondo (New York, 1967), 267–68Google Scholar, writes that while the Yokohama Specie Bank was at the start of private origin, within a decade it became in effect a government bank. “The government initially provided one-third of the capital and up to three-quarters of the deposits. The bank suffered major losses in its early operations, and in the process of repeatedly bailing it out the government assumed complete control.” He writes that in the late 1880s the Ministry of Finance arranged that the Bank of Japan would “not engage in foreign exchange business, would provide cheap deposits to the Yokohama Specie Bank, and would rediscount its foreign exchange bills at preferentially low interest rates.” Thus, the specialized bank not only came to dominate foreign trade financing, but could subsidize export industries by making them low interest-rate loans. See also Sarasas, Phra, Money and Banking in Japan (London, 1940), 158–61Google Scholar. There are several histories of the Yokohama Specie Bank in Japanese: one was published by the bank, in Tokyo, in 1920; another is a recent multivolume work by Shinji Arai, History of the Yokohama Specie Bank (this is partly a documentary collection, mixed with historical summaries; Shinji Arai was the project editor; Japanese scholars cite it as YSC zenshi). Very useful is Japan, Ministry of Finance, Business Report of Banking and Trust Business (Tokyo, 1916)Google Scholar. The bank's Annual Reports are located at the University of Tokyo. I am indebted to Professor Yamazaki for his gracious and splendid help with the Japanese-language literature. His insights were invaluable. On YSB's first branch office in Shanghai, see Wray, “Japan's Big Three in China,” 17, and Wray lo Wilkins, 25 June 1986.

36 Sarasas, Money and Banking in Japan, 258; Wray, Mitsubishi and the N.Y.K., 395 (loans to the Tayeh mines); Patrick, “Japan,” 271; Allen, Short Economic History, 54, writes that the Industrial Bank of Japan raised monies in London, guaranteeing and selling several issues of South Manchurian Railway sterling debentures between 1907 and 1911. The South Manchurian Railway Company, Ltd., registered in Tokyo, 7 Dec. 1906, was listed in the Stock Exchange Official Intelligence, 1914 (London), 379Google Scholar, but with no mention of the Industrial Bank of Japan. Employees of the Yokohama Specie Bank, Ltd., 7 Bishopsgate, London, were “The London Agents for the Sterling Bonds” of this railway. Principal and interest on the sterling bonds were guaranteed by the Japanese government and payable at the Yokohama Specie Bank office in London. I think Allen is wrong, and that the Industrial Bank raised money on its own debentures in London and then (as Hugh Patrick suggests) channeled it through Japan to the South Manchurian Railway and other ventures. According to Sarasas, the Industrial Bank's first overseas investments were in 1906 in public utilities and loans to private enterprises in Korea. Money and Banking in Japan, 258. Sarasas seems to have neglected the earlier loan to the Tayeh mines in China in 1903 that preceded the Korean loans. Wray, Mitsubishi and the N.Y.K., 349 (on the Yasuda Bank).

37 Ibid., 60, 85–86.

38 Ibid., 2, 61, 133–36, 219ff., 342, 355–56. At first Mitsubishi was the largest single stockholder in NYK, but by the mid–1890s, the Imperial Household was in first place; ibid., 239, 258. By the early 1880s, the connections between Yokohama and Shanghai had become very easy with almost daily steamers plying the route. See J. Whitie, London, to E. M. Sang, Brussels, 6 March 1883, acq. 2, box 7, Singer Manuscripts, State Historical Society ol Wisconsin.

39 Wray, Mitsubishi and the N.Y.K., 186, 342, 346, 348ff., 388–89, 391; Hou, Foreign Investment, 61. The British, with 52 percent, were in first place among the shipping companies calling at Chinese ports.

40 Mitsui & Co., Ltd., 100 Year History, 27, 31, 44–46. For its early activity importing raw cotton into Japan, see Sugiyama, Kazuo, “Trade Credit and the Development of the Cotton Spinning Industry,” in Marketing and Finance in the Course of Development (Proceeding of the Third Fuji Conference), ed. Nakagawa, Keiichiro (Tokyo, 1978), 69Google Scholar. Mitsui & Co., 100 Year History, 63; data on employment from, unpublished material in the Tokyo.

41 Note that neither Table 1 nor 2 includes Korea, undoubtedly because Korea was annexed to Japan in 1910 and thus in 1914 was a Japanese colony. Before 1910, Korea had attracted sizable Japanese investments in banking, trade, and shipping facilities, as well as in railroads and certain agricultural ventures; investments grew after colonization. The Japanese interests were not nearly as large as those in China, but their precise extent is not clear. See the extremely useful article by Duus, Peter, “Economic Dimensions of Meiji Imperialism: The Case of Korea, 1895–1910,” in The Japanese Colonial Empire 1895–1945, ed. Myers, Raymond H. and Peatti, Mark R. (Princeton, N.J., 1984), 128–63Google Scholar.

42 Data on India are also missing in Tables 1 and 2. Wray, Mitsubishi and the N.Y.K., 229, 289, 293–302, and 400–408 (on the Bombay and Calcutta lines of NYK. 1896–1914). Mitsui & Co. began importing Indian raw cotton into Japan in 1892–93. buying it from Ralli Brothers, a British trading house. Soon, Mitsui & Co. bypassed Ralli Brothers and purchased cotton directly at the cotton exchange in Bombay. By 1897, the Bombay office of Mitsui & Co. was purchasing all its cotton directly, independently of the Bombay cotton exchange. Mitsui & Co., 100 Year History, 48. On Ralli Brothers, see Chalmin, Negoçiants et Chargeurs, 25–26; Ralli Brothers had established itself in Calcutta in 1850 and then in Bombay. On Naigaiwata, see Mitsui & Co., 100 Year History, 48–49: on Gosho, Chao, Development of Cotton Textile Production, 99, though this information may refer to a period after 1914 (Chao is not explicit).

43 In 1913, the share of Japan's trade with China (22.9 percent) roughly equaled its share with the United States (22.5 percent). In subsequent years, the United States became far more important than China in Japan's foreign trade. Remer. Foreign Investments in China, 460.

44 Mitsui & Co., 100 Year History, 27.

45 Silk Association of America, Annual Reports; Arai, Shinji, History of the Yokohama Specie Bank (Tokyo, 1981), 2: 36, 38Google Scholar (in Japanese; I am indebted to William Johnston for the translation), and U.S. Alien Property Custodian, Annual Report 1943–1944, 87–88. Actually, as early as 1880, the Japanese Finance Ministry gave permission to the Yokohama Specie Bank to set up “branches, agencies or representative offices in London, Paris, New York, San Francisco, and Shanghai.” Arai, History of the Yokohama Specie Bank, 2: 38. As noted, the bank did not open a Shanghai office until 1893. But a small representative office (or “agency”) appears to have opened in San Francisco in 1886, supplementing the one opened in New York in 1880. See Yokohama Specie Bank,The History of the Yokohama Specie Bank (Tokyo, 1920)Google Scholar, in Japanese (Professor Yamazaki referred me to the 1886 date in this reference). Arai, History of the Yokohama Specie Bank, 2: 91, notes that in 1899, according to a decision of the bank's directors, the offices in Tokyo, Nagasaki, Lyons, San Francisco, Hawaii, Bombay, Hong Kong, Shanghai, and Tientsin were made branches, but because of U.S. law (actually because of New York state law), the New York “agency” remained as it was, as an agency. See Cross, Ira, Financing an Empire: History of Banking in California (Chicago, 1927), 2: 641Google Scholar, on the San Francisco branch of the Yokohama Specie Bank from 1899 onward; ibid., 3: 517, on the branch in Los Angeles. The Yokohama Specie Bank appears to have had some kind of representation in Hawaii in 1892 (before U.S. annexation). See Japan, Ministry of Finance, Business Report, 66. On the Hawaiian “branch,” Arai, History of the Yokohama Specie Bank, 2: 91. Undoubtedly, the latter was a facility to cope with the needs of Japanese emigrants to Hawaii. See Wilkins, History of Foreign Investment in the United States, forthcoming. Cross, Financing an Empire, is very good on the “Japanese” banks in California, but says nothing on the place of the owners' residence.

46 Wray, Mitsubishi and the N.Y. K., 91 (initial plans), 264 (Hawaii); 264–66, 277, 344, 400, 408–9, 421.

47 U.S. House of Representatives, Committee on Merchant Marine and Fisheries, Steamship Agreements and Affiliations in the American Foreign and Domestic Trade, 63d Cong. (1914), 131; Allen, Short Economic History, 92; before the opening, NYK was already making plans to take advantage of the canal; Wray, Mitsubishi and the N.Y.K., 400, 409.

48 Mitsui & Co., 100 Year History, 32, 34, 69; Report of Business Conditions of Mitsui Bussan, Nov. 1913–April 1914, in Mitsui & Co., Ltd., Archives, Tokyo. Professor Yamazaki was most helpful with the translation of this Japanese-language report.

49 Report of Business Conditions. Prior to 1911, Chinese raw cotton imports into Japan had exceeded American raw cotton imports. After 1912, U.S. raw cotton imports grew rapidly. In first place, throughout, were imports into Japan of Indian raw cotton. See A Yearbook of the Cotton Industry of the World and Japan (1935), pt. 2, p. 7 (in Japanese). My thanks go to Professor Yamazaki for this reference. As noted earlier in this paper, the Japanese trading companies were buying cotton directly in India; Mitsui & Co., 100 Year History, 50, and Yamaguchi, Kazuo et al. ,“100 Year History of Mitsui & Co.,” unpub. MS (1978), 1: 357 (in Japanese); Mitsui & Co., 100 Year History, 50, 71–72; 77–78Google Scholar.

50 Details are in Wilkins, History of Foreign Investment in the United States, forthcoming. I am grateful to Professor Kawabe for the identification of “Oria Kai.” On the Yokohama Silk Trading Company, Mitsui & Co., 100 Year History, 70. “R. Arai” was Rioichiro Arai, the grandfather of Haru Matsukata Reischauer. He came to the United States in 1876 and at once began to handle Japanese silk imports into America. Haru Reischauer's new book documents this Japanese immigrant's experiences—as representative of Japanese silk exporters. Samurai and Silk (Cambridge, Mass., 1986), 190–257, 223 (Doshin Kaisha)Google Scholar.

51 Kawabe, Nobuo, “Japanese Business in the United States before World War II: the Case of Mitsubishi Shoji Kaisha, the San Francisco and Seattle Branches,” (Ph. D. diss., Ohio State University, 1980), 18Google Scholar. In addition, Rioichiro Arai in 1903 established a separate cotton department in his silk trading company. Reischauer, Samurai and Silk, 237. Haynes, Williams, American Chemical Industry (New York, 1954), 2: 274Google Scholar; Wilkins, “American-Japanese Direct Foreign Investment,” 510.

52 Best's Insurance Report, 1914, 360, which describes the firm as operating all over the world. Professor Tsunehiko Yui has been very helpful in discussing with me the international character of this particular Japanese insurance firm.

53 Yosuke Kinugasa, “Japanese Firms' Foreign Direet Investment in the United States—The Case of Matsushita and Others,” in Okochi and Inoue, Overseas Business Activities, 57. Fruin, W. Mark, Kikkoman: Company, Clan, and Community (Cambridge, Mass., 1983)Google Scholar, regrettably does not mention this early foreign direet investment.

54 As Ozawa, Multinationalism, 83. points out, the Japanese “in general are notoriously poor linguists.”

55 I can document the pre–1914 presence of Japanese business in all these places and other cities as well; Wray, Mitsubishi and the N.Y.K., 14–15, 306, 414 (on NYK). NYK also had an Australian line, which had three ships in 190.3; ibid., 414; data on Mitsui employment from Japanese Business History Institute, Tokyo. In 1908, Japanese immigrants began arriving in Brazil as wage workers. In time, a thriving Japanese community developed and Japanese multinational enterprise invested. Ozawa, Multinationalism, 127; I have found no evidence, however, of multinational enterprise involvements before 1914.

56 For U.S. figures, see Wilkins, Emergence of Multinational Enterprise, 201.

57 Mitsui & Co., 100 Year History, 55; Wray, Mitsubishi and the N.Y.K., 270.

58 The Japanese did use British and Continental banks. See the fascinating table in Report of Business Conditions of Mitsui Bussan, Nov. 1913–April 1914, on the lines of credit from foreign (principally British) financial houses. Clearly, however, the Japanese could not expect the same kind of regular steady financing from Britain as Americans could; the difference in degree is crucial. There was also the “Mitsui Bank,” founded in 1876, but in these years Mitsui & Co. appears to have used it at home and the specialized Yokohama Specie Bank for its international business transactions.

59 Allen, Short Economic History, 54; Patrick, “Japan,” 271; Stock Exchange Official Intelligence, 1914, 404.

60 Sarasas, Money and Banking in Japan, 271, and Duus, “Economic Dimensions,” 154–55. Also on the Dai Ichi Ginko, see Patrick, “Japan,” which says nothing about its role in Korea. On Taiwan banking, see Sarasas, Money and Banking in Japan, 269–371 and Palgrave's as cited in U.S. Federal Trade Commission, Report on Cooperation in American Export Trade (Washington, D.C., 1916), 1: 64Google Scholar.

61 The Bank of Korea had an original paid up capital of ten million yen, of which three million came from the Japanese government. By 1940 the Bank of Chosen had branches in Korea, Japan, China (especially in Manchuria), and a “branch” in New York. Sarasas. Money and Banking in Japan, 271, 274–76. See also Allen, Short Economic History, 55.

62 I am arguing here that Americans altered British textile technology to meet U.S. conditions, while the Japanese appear to have adopted the technology—at least in spinning—in a more exact manner. On this see Saxonhouse, Gary, “A Tale of Japanese Technological Diffusion in the Meiji Period,” Journal of Economic History 34 (March 1974): 150–55CrossRefGoogle Scholar. In weaving, the Toyoda Automatic Loom was an important Japanese innovation. Mitsui & Co., 100 Year History, 74–77. Yet, it was not until after our period that it was widely adopted in Japan and in Japanese mills abroad. Data from Professor Kuwahara, 16 Jan. 1986.

63 These conclusions have been developed out of lengthy discussions I had in Japan in July 1984 with Professors Yamazaki, Yasumuro, and Kuwahara. As noted in my introduction, students of multinational enterprise emphasize that for a company to succeed abroad it must have some kind of advantage. Substantial attention had been paid specifically to “technological advantages.” Thus, in attempting to explain the Japanese success in China, my first search was for a technological advantage. Obviously, I found none, since Chinese firms as well as Japanese ones could adopt the British technology. Then I asked, why did the Japanese do better than the British with the same British technology? I found Japanese advantages, but not in production technology. These advantages contributed to Japan's economic superiority in the region.

64 Wray, Mitsubishi and the N.Y.K., passim, makes it very clear how tied shipping was to the textile industry. In this context, Wray writes, “If we take, for example, the 1893 Bombay line alliance of the cotton spinners, the Japanese government, the Yokohama Specie Bank, Tata's Indian raw cotton-exporting firm, Japanese importers like Mitsui Bussan, and N.Y.K., it is hard to imagine this organized entrepreneurial system working for several decades with a foreign shipping company in place of N.Y.K.” Ibid., 453, The only alien element in this cooperative scheme was the Tata group, which eventually withdrew from the coalition; ibid., 509. Mitsui Bussan and Mitsui & Co. were the same firm. Ibid., 6 (on the big four).

65 Kikkoman's soy sauce plant in Denver was another exception.

66 Most authors on Japanese multinational enterprise have assumed that the phenomenon is new. Kojima, Japanese Direct Foreign Investment, 7, for example, writes that “the activities of multinational corporations are new dynamic elements in the international economy” (my italics); Ozawa, Multinationalism, 3, notes that before the Second World War, Japanese companies set up production facilities abroad, but only in Japanese colonies—Manchukuo, Korea, and Formosa. Tsurumi, The Japanese Are Coming, 2, gives a chronology of Japanese foreign direct investments with the first one in the 1920s. He lists nothing during or before the First World War, and only four manufacturing subsidiaries worldwide before the Second World War. He looked at manufacturing subsidiaries of trading as well as manufacturing companies. Until very recently historians of Japan have neglected the history of Japanese multinational enterprise. When they have dealt with corporate histories, they have not taken into account the extensive literature on multinational enterprise. Wray, Mitsubishi and the N.Y.K., who does look at business managers' international strategies, found a dearth of comparable studies (see his comments on Japanese business historiography on p. 11). A partial exception is the research on Mitsui & Co.

67 In 1975, 22.2 percent of Japanese worldwide investments were in textiles—the largest single sector for its foreign direct investment. Ozawa, Multinationalism, 29. More recent figures show a lesser role for textiles, but still one of importance. United Nations Centre on Transnational Corporations, Transnational Corporations in World Development, Third Survey (New York, 1983), 296Google Scholar. In its Annual Report 1983, 13, Mitsui & Co. pointed out that it had the highest level of overseas investment of any Japanese company. “In recent years, Mitsui & Co. has had more than U.S. $1 billion investments and loans committed to more than 280 ventures, located in diverse parts of the globe.” Together, these ventures and Mitsui & Co. itself employed 129,900 persons; ibid., 16.

68 Ozawa, Multinationalism, 166, recounts how the Japanese responded to the aftermath of the 1973–74 oil crisis, by buying oil directly from nationalized companies and saving costs in the process. The student of Japanese direct raw cotton purchasing techniques has a sense of déjà vu.

69 The U.S.-owned textile mill in China, noted earlier in this paper, was not owned by an American textile manufacturer. While clearly there was more Japanese government ownership participation in its nationals' pre–1914 international business—in shipping and banking—than in the U.S. case (U.S. government ownership of pre–1914 multinational enterprises was nonexistent), I do not see how this served to change—or to determine—Japanese entrepreneurial strategy in a significant manner. My finding in this regard seems to coincide with that of other researchers, including Yamamura, Kozo, A Study of Samurai Income and Entrepreneurship (Cambridge, Mass., 1974), 187CrossRefGoogle Scholar. Duus, “Economic Dimensions,” 147, writes of Japanese businessmen in the early twentieth century that, while they “supported political expansion [in Korea], they did not regard the acquisition of new territory as necessary for the expansion of private business interests abroad. The prevailing view among business leaders [at this time] was that the most promising business opportunities in East Asia lay not in Korea but in China, where there was no possibility of extending political control.” The large Japanese government direct investments in the South Manchurian Railway suggest, however, a highly supportive role.

70 On subsequent expansion, for a start see data in Kuwahara, “The Business Strategy,” and Remer, Foreign Investments in China, 446–50, 469–553. Lockwood, Economic Development in Japan, asserts that the war years, 1914–18, brought a “sudden reversal” in Japan's debtor nation position, and that Japan in the post—First World War years became a creditor nation. In any study of early Japanese multinationals, it is important that students deal with the companies' worldwide investments, not simply those in East Asia.