Working Paper: NBER ID: w3293
Authors: Robert E. Lipsey
Abstract: The press and business magazines are filled with stories about a rush of American firms into the European Community to take advantage of, or avoid the adverse consequences of, the expected formation of a single market in 1992. Yet, it is hard o find evidence of a large shift in plant and equipment expenditures, employment, or financial investment toward the EC countries by American firms. The main reason seems to be that large American manufacturing firms are already well entrenched in the EC, and may even be better positioned to take advantage of the single market than most of their European rivals. The U.S. firms (unlike most Japanese companies) already supply almost all their share of the EC market from operations within the EC and depend very little on importing from the U.S. There is some indication of moves toward EC production by non-manufacturing operations such as distribution and services, by smaller companies, by those not now producing extensively in the EC, and by firms hoping to take part in public procurement.
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Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| establishment of a single European market (F55) | American firms' operational strategies in Europe (F23) |
| American firms' entrenched position in the EC (F23) | better positioned to capitalize on opportunities presented by the single market (P17) |
| lack of significant shifts in plant and equipment expenditures (E20) | measured response to the single market formation (F55) |
| American firms' focus on strengthening marketing and finance operations (F23) | less pronounced investment response to the single market (F21) |
| increase in EC share of direct investment between 1984 and 1987 (F21) | capital gains rather than new investments (E22) |