Tennent, Kevin
(2009)
Owned, monitored, but not always controlled: understanding the success and failure of Scottish Free-Standing Companies, 1862-1910.
PhD thesis, London School of Economics and Political Science.
Abstract
Mira Wilkins argues that the free-standing company was an important form of foreign
investment in the pre-1914 period, although its implications for economic development
in home and host countries remain unclear. The free-standing company, here defined as
a company that invested abroad without any domestic operations, was held to be at an
immediate disadvantage since it lacked competitive advantage and core competencies,
and had to rely on intermediaries. Scotland was home to at least 400 free-standing
companies between 1862 and 1900. A core debate around these firms has been the
extent to which they were entrepreneurial firms or merely devices for speculation. This
thesis examines five of these companies to analyse the role of their Scottish Head
Offices within the company. Two of these five companies operated in Australasia and
three operated in the USA. The thesis finds that the two firms operating in Australasia
were more effective in establishing control over their operations there by devising clear
command structures. They were more adept than the U.S.-based firms at using their
head office presence to establish marketing links in the United Kingdom, and also better
at internalising information and innovating to create new combinations. The
Australasian companies further had the advantage that the UK formed their main
marketplace, while domestic consumption was the main focus for the companies
operating in the US. The thesis concludes that the role of the principal based in the
home country was important for free-standing companies in establishing competitive
advantage in their operations in the host country. The Home Office is therefore key in
overcoming the lack of initial competitive advantage that Wilkins claimed
disadvantaged them. This can be attained either by a relationship of direct hierarchical
control or by close monitoring.
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