~ ) Pergamon 0263-2373(95)00018-6 European ManagementJournal Vol. 13, No. 3, pp. 276-285, 1995 Copyright © 1995 Elsevier Science Ltd Printed in Great Britain. All rights reserved 0263-2373/95 $9.50 + 0.00 Characteristics and Performance of Japanese Foreign Direct Investment in Europe DETLEV NITSCH, Doctoral Candidate in Business Policy, University of Western Ontario; PAUL BEAMISH, Royal Bank Professor of International Business, University of Western Ontario; SHIGE MAKINO, Doctoral Candidate, University of Western Ontario This article by Detlev Nitsch, Paul Beamish and Shige Makino provides an illuminating presentation of the characteristics and performance of 118 Japanese subsidiaries in Europe. The study is one of the few that contains performance data at the subsidiary level. Subsidiary performance is limited to the initial mode of entry, industry and country of entry, subsidiary size, and reasons for entering. Japanese investment in Europe grew significantly in the late 1980s, but was heavily concentrated in a few industries. Entry mode preferences have also shifted, away from greenfield start-ups to more use of joint ventures. Conclusions are of interest to European and non-European corporate managers, and public policy-makers. The European Union attracts the attention of managers in other parts of the world both as a source of serious global competitors, and as a compelling market for a multinational firm's products. This artide examines the latter point, looking at Europe as a manufacturing site from the point of view of Japanese manufacturing corporations with subsidiaries in the region. Europe has often been depicted in the popular and business press as a homogeneous entity, especially in the late 1980s and early 1990s as worldwide excitement about '1992' reached a fever pitch. Managers were exhorted to pay attention to 'EC '92', or to 'go to Europe', without regard for where their business would be located once behind the 'EC barrier'. Readers of this Journal are, of course, well aware that cultural, political, regulatory, and other differences exist between Western European countries. Indeed, many writers have des- cribed these differences, in this and other journals. However, much of the material about country differences in Western Europe has been neither normative nor based on single-subject case studies. Our objective in this article is twofold: to provide a description of foreign investment patterns in Europe based on a relatively large sample from a single home country, and to demonstrate that the choice of host country can have a significant impact on subsidiary performance. The observations made in this article will be of interest to three groups of executives: Managers of non-Europeanfirms. This article provides, especially for those contemplating a move into Europe, some insights into the motivations and ultimate performance of non-European investing companies. Because our data are at the industry and country level, and include performance rankings for individual subsidiaries, we are able to draw conclusions at a finer-grained level of analysis than is typical in this genre. Managers of Europeanfirms Japanese corporations have significantly increased their ownership of European-based manufacturing subsidi- aries, and this trend shows no signs of abating. Many of these investments have been made using new, green- field start-ups, but a significant proportion are joint ventures and acquisitions. Existing European companies may (willingly or unwillingly) find themselves targets of an acquisition or takeover attempt; similarily, they are potential partners in international joint ventures, whether initiated by a foreign company or by them- selves. And finally, European firms must compete with foreign subsidiaries in their home markets and abroad. 276 EUROPEAN MANAGEMENT JOURNAL Vol 13 No 3 September 1995