chapter  11
28 Pages

Assessing the Role of Foreign Direct Investment in the Food Manufacturing Industry

WithCharles R. Handy, Dennis R. Henderson

This chapter focuses on exports by multinational food manufacturing firms and on direct investment in and operation of foreign affiliates. Modern measures of a country’s international competitiveness often incorporate sales from foreign affiliates of home firms. Foreign affiliation can occur in various ways, e.g., license production to a foreign firm, franchise a foreign firm to market products under the home firm’s trademark, acquire a minority interest in a foreign firm, develop a joint venture with a foreign partner, or obtain complete or majority ownership of foreign operations. Sales from foreign-owned food manufacturing operations in the United States (US) are considerably smaller than are those from US-owned affiliates abroad, but have been expanding at more rapid pace. Comparing all multinational firms with firms that have no foreign affiliates reveals that the latter are associated with a measurably higher Return on borrowed and invested capital than the former, implying that foreign direct investment comes at a cost in the profit account.