STEP – Centre for Innovation Research 1 Research on foreign ownership in Norwegian industry

STEP – Centre for Innovation Research 2 Stock of foreign direct investments (FDI) in Norway, (Norges Bank)

STEP – Centre for Innovation Research 3  The main motive behind foreign establishments in Norway is market access  Mergers and acquisitions are the most common establishment strategies  Foreign ownership is most common in the oil sector and in services (trade, finance, insurance)  While FDI in industry is limited in relative terms, approximately 1/3 of the share capital in listed manufacturing firms is foreign owned

STEP – Centre for Innovation Research 4 Foreign ownership in Norwegian industry, Gabriel R. G. Benito (1996)

STEP – Centre for Innovation Research 5 Poses the question of whether it matters if a firm is foreign owned or Norwegian owned - and if so, how Discussion based on existing litterature Starting point: substantial disagreement in the public debate on the role foreign ownership has – and should have – in Norwegian industry

STEP – Centre for Innovation Research 6 Generally few studies of FDI in Norway Previous studies include: (1) Stonehill (1965): foreign owned firms were generally larger and more efficient than Norwegian owned firms (2) Maktutredningen (1982), Midttun, Noreng and Nygaard (1987): foreign owned firms were not more profitable than Norwegian owned firms within the same brances of industry (3) Simpson (1994): foreign owned firms were larger and more efficient (4) Kvinge (1994): close-downs were more frequent for Norwegian owned firms than for foreign owned, and the latter showed a more positive development with regards to employment Indicate that FDI in Norway have been beneficial to the national industry in many respects

STEP – Centre for Innovation Research 7 Ownership matters, but should be assessed according to other crititeria than nationality

STEP – Centre for Innovation Research 8 Study of national and regional effects of foreign ownership in Norwegian industry by the Foundation for Research in Economics and Business Administration (1999)

STEP – Centre for Innovation Research 9 Main findings:  Whether a company is Norwegian or foreign owned do not appear to be of particular importance to the number of linkages to the surrounding region  Regional effects are dependent upon the status the Norwegian subsidiary has in the multinational as a whole - the more strategic responsibilities the subsidiary had, the stronger were the links to the surrounding region  The majority of the firms purchased goods and services locally, but the extent varied  Staff was recruited locally from competing firms, institutions of higher education, college training schemes, employment companies, and through internal recruitment  19 of 21 of the subsidiaries were involved in R&D activities - either in-house or through Norwegian R&D institutions

STEP – Centre for Innovation Research 10  The report recommends that there is established a network of regional offices that offers information and other services to foreign firms that invest/are interested in investing in Norwegian industry

STEP – Centre for Innovation Research 11 Industrial clusters and foreign companies’ centres of excellence in Norway, Gabriel R.G. Benito (2000)

STEP – Centre for Innovation Research 12 Starting point (1) The general acknowledgement that the effects of foreign ownership on local industry depend on the role and responsibilities assigned to the subsidiary; (2) That while earlier research on MNEs tended to view them as traditional unitary firms in which the parent company constituted the centre and the foreign subsidiaries the periphery, it is now increasingly recognized that subsidiaries have widely different roles; and that (3) Some subsidiaries become ”centres of excellence”, by which is meant that they control resources on which other parts of the MNE depend for their operation, and thus hold a strategic position in the corporation

STEP – Centre for Innovation Research 13 Main question To what extent have ”centres of excellence” been established in Norway by foreign MNEs?

STEP – Centre for Innovation Research 14 Findings and conclusion While only a minority of foreign owned units in Norway could be given the status of ”centres of excellence”, such CoEs seemed to be more than just a rarity Depending on the criteria, their number ranged from 28 to 221 CoEs appeared to be unevenly distributed across industries the Norwegian subsidiaries of foreign MNEs have considerably varying roles, which in turn elucidates the importance of not only what sort of FDI a country is able to attract, but also of the subsequent development of subsidiary roles

STEP – Centre for Innovation Research 15 Study on environmental influences of MNE subsidiary roles, by Benito, Grøgaard and Narula (2003)

STEP – Centre for Innovation Research 16 Examines the importance of environmental factors in determining MNE subsidiary roles in the Nordic countries Subsidiary roles are assessed in terms of scope of activities and competence level Particular focus upon one specific environmental factor: EU membership Based on a large-scale survey of foreign owned units in three Nordic countries: Denmark, Finland and Norway – of which the two former are EU members and the latter not

STEP – Centre for Innovation Research 17 Findings and conclusion Subsidiaries in Norway scored significantly lower in terms of both scope of activities and competence level than those in Denmark and Finland This finding held true even when controlled for other potentially influential factors Thus: membership of an integration scheme such as the EU plays a significant role in determining subsidiary roles - the reason being that such schemes require economic convergence, establishment of common institutions and synchronized policy framworks

STEP – Centre for Innovation Research 18 Studies of the effects of globalisation on innovativeness, competitiveness and grotwh of firms and regions, the TIK Centre at the University of Oslo: the effects of foreign ownership is to a large extent determined by the structural characteristics of the business system in the foreign owner’s home country