Hostname: page-component-cd9895bd7-dk4vv Total loading time: 0 Render date: 2024-12-18T13:18:52.888Z Has data issue: false hasContentIssue false
  • English
  • Français

Investing in a Wealthy Resource-Based Colonial Economy: International Business in Australia before World War I

Published online by Cambridge University Press:  21 July 2020

Simon Ville  and
David Tolmie Merrett
Get access Rights & Permissions [Opens in a new window]

Abstract

The article is a rare investigation into multinational activity in a wealthy resource-based colonial economy toward the end of the first wave of globalization. It challenges the conventional wisdom that multinationals had a limited presence in pre-1914 Australia, where government loans and portfolio investment from Britain into infrastructural and primary industries dominated. Our new database of nearly five hundred foreign firms, from various nations and spread across the host economy, shows a thriving and diverse international business community whose agency mattered for economic development in Australia. Colonial ties, natural resources, stable institutions, and high incomes all attracted foreign firms.

Keywords

multinationalsAustraliacolonial economynatural resourcesfree-standing companies
Type
Research Article
Information
Business History Review , Volume 94 , Issue 2 , Summer 2020 , pp. 321 - 346
Copyright
Copyright © The President and Fellows of Harvard College 2020

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

We would like to thank Lauren Samuelsson and Dr. Claire Wright for research assistance and participants at the World Economic History Congress (2018) and the Asia-Pacific Economic and Business History Conference (2018) for their helpful comments on earlier drafts of the paper, particularly the respondent comments provided by Mira Wilkins and Geoff Jones.

References

1 McLean, Ian W., Why Australia Prospered: The Shifting Sources of Economic Growth (Princeton, 2013)Google Scholar.

2 Dyster, Barrie and Meredith, David, Australia in the Global Economy: Continuity and Change (Cambridge, U.K., 2012)Google Scholar; Pinkstone, Brian and Meredith, David, Global Connections: A History of Exports and the Australian Economy (Canberra, 1992)Google Scholar.

3 Butlin, Noel, Australian Domestic Product, Investment and Foreign Borrowing, 1861–1938/39 (Cambridge, U.K., 1962), chaps. 20 and 21Google Scholar.

4 Forster, Colin, Industrial Development in Australia 1920–30 (Canberra, 1964)Google Scholar.

5 See, for example, Twomey, Michael J., A Century of Foreign Investment in the Third World (London, 2000)Google Scholar; Wilkins, Mira, The History of Foreign Investment in the United States, 1914–1945 (Cambridge, MA, 2004)Google Scholar; and McKern, Bruce, ed., Transnational Corporations and the Exploitation of Natural Resources (London, 1993)Google Scholar.

6 The major contributions to this literature remain those of Butlin, Noel: Investment in Australian Economic Development, 1861–1900 (Cambridge, U.K., 1964), 49–52Google Scholar; and Australian Domestic Product. A more recent major contribution to Australian economic history also overlooks the agency of entrepreneurship: McLean, Why Australia Prospered.

7 Davis, Lance E. and Gallman, Robert E., Evolving Financial Markets and International Capital Flows: Britain, the Americas, and Australia, 1865–1914 (Cambridge, U.K., 2001), 471–544CrossRefGoogle Scholar; Edelstein, Michael, “Foreign Investment, Accumulation and Empire,” in The Economic History of Britain since 1700, vol. 2, ed. Floud, Roderick and Johnson, Paul (Cambridge, U.K., 2001), 194–95Google Scholar; Boehm, Ernest A., Prosperity and Depression in Australia 1887–1897 (Oxford, 1971), 279Google Scholar, table 67; Hall, Alan R., The London Capital Market and Australia 1870–1914 (Canberra, 1963)Google Scholar; John D. Bailey, “Australian Company Borrowing, 1870–1893: A Study in British Overseas Borrowing” (D.Phil. thesis, Oxford University, 1958); Butlin, Investment.

8 Wilson, Roland, Capital Imports and the Terms of Trade (Melbourne, 1931)Google Scholar; Paish, George, “Great Britain's Capital Investments in Individual Colonial and Foreign Countries,” Journal of the Royal Statistical Society 74, no. 2 (1911): 167–200CrossRefGoogle Scholar.

9 Hymer, Stephen H., The International Operations of National Firms: A Study of Direct Foreign Investment (Cambridge, MA, 1976)Google Scholar.

10 Wilkins, Mira, “Comparative Hosts,” Business History 36, no. 1 (1994): 19CrossRefGoogle Scholar.

11 Dunning, John H. and Lundan, Sarianna M., Multinational Enterprises and the Global Economy, 2nd ed. (Cheltenham, 2008), 173–75Google Scholar.

12 Twomey, Foreign Investment; Davis and Gallman, Evolving Financial Markets. Their calculations were likely based on BT 31 (Board of Trade: Companies Registration Office: Files of Dissolved Companies), 1856–1931, The National Archives, Kew, U.K.; and listing applications, Guildhall Library, London Stock Exchange Archives. Mira Wilkins, personal communication, email, 30 Oct. 2018.

13 Wilkins, “Comparative Hosts,” 20; Dunning and Lundan, Multinational Enterprises, 174.

14 Davis and Gallman, Evolving Financial Markets, 543; Blainey, Geoffrey, The Rush That Never Ended: A History of Australian Mining, 2nd ed. (Melbourne, 1969)Google Scholar.

15 Twomey, Foreign Investment, 196.

16 Davis and Gallman, Evolving Financial Markets, 473.

17 Blainey, Geoffrey, “The History of Multinational Factories in Australia,” in Overseas Business Activities, ed. Okochi, A. and Inoue, T. (Tokyo, 1984), 183–210Google Scholar; Blainey, , Jumping over the Wheel: A Centenary History of Pacific Dunlop (St. Leonards, 1993)Google Scholar; Blainey, , White Gold: The Story of Alcoa in Australia (St. Leonards, 1997)Google Scholar; Merrett, David, “Big Business and Foreign Firms,” in Cambridge Economic History of Australia, ed. Ville, Simon and Withers, Glenn (Melbourne, 2015), 309–29Google Scholar; Ville, Simon, The Rural Entrepreneurs: A History of the Stock and Station Agent Industry in Australia and New Zealand (Melbourne, 2000)Google Scholar; Merrett, David, “Paradise Lost? British Banks in Australia,” in Banks as Multinationals, ed. Jones, Geoffrey (London, 1991)Google Scholar; Jones, Geoffrey, ed., British Multinationals: Origins, Management and Performance (Aldershot, 1986)Google Scholar; Jones, , Merchants to Multinationals: British Trading Companies in the Nineteenth and Twentieth Centuries (New York, 2000)Google Scholar.

18 McCarty, Jon, “The Staple Approach in Australian Economic History,” Business Archives and History 4, no. 1 (1964): 1–22CrossRefGoogle Scholar.

19 Forster, Industrial Development. For a summary of interwar structural change, see Merrett, David and Ville, Simon, “Tariffs, Subsidies and Profits: A Re-assessment of Structural Change in Australia, 1901–1939,” Australian Economic History Review 51, no. 1 (2011): 46–70CrossRefGoogle Scholar.

20 Dunning and Lundan, Multinational Enterprises, 172–76.

21 Among the pioneers in business history, see Chandler, Alfred D., Scale and Scope: The Dynamics of Industrial Capitalism (Cambridge, MA, 1990)Google Scholar; and Hannah, Lesley F., The Rise of the Corporate Economy, 2nd ed. (London, 1983)Google Scholar. On Australia, see Fleming, Grant, Merrett, David, and Ville, Simon, The Big End of Town: Big Business and Corporate Leadership in Twentieth-Century Australia (Melbourne, 2004)CrossRefGoogle Scholar.

22 Jones, Geoffrey, “The End of Nationality? Global Firms and ‘Borderless Worlds,’” Zeitschrift für Unternehmensgeschichte 51, no. 2 (2006): 157CrossRefGoogle Scholar. A further control complexity, known as partial or functional control, exists where a firm invests in an overseas enterprise not for the purpose of management of that firm but to secure access to knowledge and other resources.

23 Fitzgerald, Robert, The Rise of the Global Company: Multinationals and the Making of the Modern World (Cambridge, U.K., 2015), 32–33CrossRefGoogle Scholar.

24 Macintyre, Stuart F., A Concise History of Australia, 3rd ed. (Melbourne, 2009), 193CrossRefGoogle Scholar; Curran, James and Ward, Stuart, The Unknown Nation: Australia after Empire (Melbourne, 2010)Google Scholar.

25 Simon Sleight, “Reading the British Australasian Community in London, 1884–1924,” in Australians in Britain: The Twentieth-Century Experience, ed. Carl Bridge, Robert Crawford, and David Dunstan (Melbourne, 2009).

26 Nash, Robert L., The Australasian Joint Stock Companies Year Book 1913–14 (Sydney, 1914)Google Scholar.

27 We excluded a small number of MNEs believed only to be operating in New Zealand.

28 Lipton, Phillip, “A History of Company Law in Colonial Australia: Economic Development and Legal Evolution,” Melbourne University Law Review 31, no. 3 (2007): 822–28Google Scholar.

29 See, for example, An Act to further amend the Companies Act 1890, 60 Vict. 1482, 24 Dec. 1896.

30 “Documents lodged under Companies Acts for Foreign Companies,” NRS 16383, Business and Company Records, New South Wales State Archives; “Registry of Foreign Companies,” VPRS 8272, Public Record Office of Victoria.

31 Pierre van der Eng, “A Case of Liability of Foreignness, or Something Else? Continental European MNEs in Australia, 1890s–1990s” (paper presented at World Economic History Congress, Boston, 2018).

32 The authors are fortunate in drawing upon the specialist knowledge and research of Gary Pursell and Monica Keneley in reaching conclusions about which firms were operating from company offices in Australia. Keneley, “British Fire Insurers in Australia 1860–1920: A Story of Enterprise, Luck and Resilience,” Business History Review, forthcoming. The authors are also grateful to other scholars who have shared their related work, including Pierre van der Eng, mentioned elsewhere in this article, and Zdravka Brunkova, David Round, and Martin Shanahan. Brunkova, Round, and Shanahan, “Attitudes and Responses to Foreign Direct Investment in Australia from Federation until World War II” (paper presented at European Business History Association Conference, Paris, 2012).

33 Simon Ville and David Merrett, “Big Business in Australia” (Source Paper No. 21, Australian National University, April 2016), 1–34; Knight, J. R., ed., Register of Defunct and Other Companies Removed from the Stock Exchange Official Year-Book, 1978–79 (West Sussex, 1979)Google Scholar; and Brash, Donald, American Investment in Australian Industry (Canberra, 1966)Google Scholar. Trove, hosted by the National Library of Australia, is located at https://trove.nla.gov.au/.

34 Bostock, Frances and Jones, Geoffrey, “Foreign Multinationals in British Manufacturing, 1850–1962,” Business History 36, no. 1 (1984): 89–126CrossRefGoogle Scholar.

35 Merrett, David T. and Ville, Simon, “Financing Growth: New Issues by Australian Firms, 1920–1939,” Business History Review 83, no. 3 (2009): 567CrossRefGoogle Scholar.

36 Fleming, Merrett, and Ville, Big End of Town, 17.

37 See Nash's discussion in the preface to the various editions of the The Australasian Joint Stock Companies Year-Book, including those published in 1902, 1907, and 1913–1914.

38 Dunning and Lundan, Multinational Enterprises, 174, table 6.1.

39 See also Edelstein, “Foreign Investment,” 194–95; and Dyster and Meredith, Australia in the Global Economy, 40–41.

40 Wilkins, Mira, “The Impact of Multinational Corporations,” South African Journal of Economic History 4, no. 1 (1989): 9CrossRefGoogle Scholar.

41 Wilkins, Mira, “The Free-Standing Company, 1870–1914: An Important Type of British Foreign Direct Investment,” Economic History Review 41, no. 2 (1988): 259–82CrossRefGoogle Scholar.

42 A wide-ranging discussion of the concept can be found in the chapters of Wilkins, Mira and Schröter, Harm, eds., The Free-Standing Company in the World Economy, 1830–1996 (Oxford, 1998)Google Scholar.

43 Vaughan-Thomas, W., Dalgety: The Romance of a Business (London, 1984)Google Scholar; Bailey, John D., A Hundred Years of Pastoral Banking: A History of the Australian Mercantile Land and Finance Company (Oxford, 1966)Google Scholar.

44 Dunning and Lundan, Multinational Enterprises, 156.

45 Wilkins, Mira, The Emergence of Multinational Enterprise: American Business Abroad from the Colonial Era to 1914 (Cambridge, MA, 1970), 186Google Scholar.

46 Multinationals after World War I are discussed in contemporary works such as Pratt, Ambrose, The National Handbook of Australian Industries (Melbourne, 1934)Google Scholar and later by scholars Forster, Industrial Development, and Brash, American Investment.

47 Wilkins, Emergence, 93–95.

48 Frances Steel, “Re-routing Empire? Steam-Age Circulations and the Making of an Anglo Pacific, c.1850–90,” Australian Historical Studies 46, no. 3 (2015): 356–73.

49 For an excellent summary of these trends, see Anne Rees, “Travelling to Tomorrow: Australian Women in the United States, 1910–1960” (PhD diss., La Trobe University, 2016), 11–13.

50 Ville, Simon and Wright, Claire, “Buzz and Pipelines: Knowledge and Decision-Making in a Global Business Services Precinct,” Journal of Urban History 45, no. 2 (2019): 191–210CrossRefGoogle Scholar.

51 Hall, London Capital Market, 91.

52 Wilkins, Emergence, 209.

53 John Wilson, “Government and the Evolution of Public Policy,” in Ville and Withers, Cambridge Economic History, 334.

54 Angeletta Leggio, “A History of Australia's Kodak Manufacturing Plant,” in AICCM Symposium 2006: Conservation of Books, Paper and Photographic Materials (Wellington, NZ, 2006), 149–51.

55 Quartermaine, M. K. and McGowan, E., “A Historical Account of the Development of Mining in Western Australia,” in Mining in Western Australia, Perth, ed. Prider, Rex T. (Nedlands, 1979), 12Google Scholar; van Helten, Jean Jacques, “Mining, Share Manias and Speculation in British Investment in Overseas Mining, 1880–1913,” in Capitalism in a Mature Economy: Financial Institutions, Capital Exports and the British Economy, 1870–1939, ed. van Helten, Jean Jacques and Cassis, Youssef (Aldershot, 1990), 159–85Google Scholar; Harvey, Charles and Press, Jon, “The City and International Mining, 1870–1914,” Business History 32, no. 3 (1990): 98–119CrossRefGoogle Scholar.

56 Fieldhouse, Derek K., Unilever Overseas: The Anatomy of a Multinational, 1895–1965 (London, 1978), 65Google Scholar; Makin, L. Jock, The Big Run: the Story of Victoria River Downs Station, 2nd rev. ed. (Marleston, 1999), chap. 15Google Scholar.

57 Critchell, James T. and Raymond, Joseph J., A History of the Frozen Meat Trade (1912; London, 1969), 46–59, 128–29Google Scholar, and 420, appendix 3.

58 Perkins, Jon, “German Shipping and Australia before the First World War,” Australian Economic History Review 29, no. 1 (1989): 42–59CrossRefGoogle Scholar.

59 Butlin, Investment, part C; Hall, London Capital Market.

60 Davis and Gallman, Evolving Financial Markets, 493–95.

61 Davis and Gallman, 482–83.

62 Boughey, David, “British Overseas Railways as Free-Standing Companies, 1900–1915,” Business History 51, no. 3 (2009): 484–500CrossRefGoogle Scholar.

63 Hausman, William J., Hertner, Peter, and Wilkins, Mira, Global Electrification: Multinational Enterprise and International Finance in the History of Light and Power, 1878–2007 (Cambridge, U.K., 2008), 31–33CrossRefGoogle Scholar, table 1.4.

64 Blainey, Rush.

65 Ville, Rural Entrepreneurs, 35–43.

66 Lionel Frost, “Urbanisation,” in Ville and Withers, Cambridge Economic History, 249.

67 For a discussion of longevity among Australia firms in the early twentieth century, see Panza, Laura, Ville, Simon, and Merrett, David T., “The Drivers of Firm Longevity: Age, Size, Profitability and Survivorship of Australian Corporations, 1901–1930”, Business History 60, no. 2 (2017): 157–77CrossRefGoogle Scholar.

68 Farmer and Company, a business begun in Sydney in 1840, was registered in England in 1897. Franklyn, H. Mortimer, A Glance at Australia in 1880 (Melbourne, 1881), 346–49Google Scholar; Nash, Robert L., The Australasian Joint Stock Companies Year-Book (Sydney, 1907), 179Google Scholar.

69 Franklyn, Glance at Australia, 240–43, 243–45, 257–61, 346–49, 352–58, 381–85, 386–88; Wikipedia, s.v. “D. & J. Fowler Ltd.,” last modified 20 Mar. 2020, 08:11, https://en.wikipedia.org/wiki/D._%26_J._Fowler_Ltd.

70 One of Sydney's leading department stores, Anthony Hordern and Sons Ltd, opened its London buying office in 1886. Melbourne's Myer Emporium opened its London buying store in 1914. Thomas J. Redmond, “The History of Anthony Hordern and Sons Limited,” Hordernian Monthly, Jan. 1938, 85; Barbour, S. M., Sidney Myer: A Life, A Legacy (Prahran, 2005), 76Google Scholar.

71 Chandler, Alfred D. Jr., The Visible Hand: The Managerial Revolution in American Business (Cambridge, MA, 1977)Google Scholar; Porter, Glenn and Livesay, Harold, Merchants and Manufacturers: Studies in the Changing Structure of Nineteenth-Century Marketing (Baltimore, 1971)Google Scholar; Nicholas, Stephen, “Agency Contracts, Institutional Modes, and the Transition to Foreign Direct Investment by British Manufacturing Multinationals before 1939,” Journal of Economic History 43, no. 3 (1983): 675–86CrossRefGoogle Scholar.

72 Edelstein, “Foreign Investment,” 195.

73 Cottrell, Phillip L., British Overseas Investment in the Nineteenth Century (London, 1975), 39–40CrossRefGoogle Scholar.

74 Saul, Samuel B., Studies in British Overseas Trade, 1870–1914 (Liverpool, 1960), 79–86Google Scholar.

75 Wilson, Alexander J., An Empire in Pawn (London, 1899)Google Scholar, chaps. 5 and 6; Bridge, Carl, “Australia, Britain and the British Commonwealth,” in The Cambridge History of Australia, vol. 2, The Commonwealth of Australia, ed. Bashford, Alison and Macintyre, Stuart (Melbourne, 2013), 518–36CrossRefGoogle Scholar.

76 Australia, Department of Trade and Industry, Directory of Overseas Investment in Australian Manufacturing Industry (Canberra, 1966).

77 A point picked up by Nash in his estimate of British capital in Australia. Nash, Australasian Joint Stock Companies, 1914, xxxi.

78 For example, Crough, Gregory J. and Wheelwright, Edward L., Australia: A Client State (Ringwood, 1982)Google Scholar.

79 Brunkova, Round, and Shanahan, “Attitudes and Responses.”

80 Ghemawat, Pankaj, The New Global Road Map: Enduring Strategies for Turbulent Times (Boston, 2018)Google Scholar.

81 Magee, Gary B. and Thompson, Andrew S., Empire and Globalisation: Networks of People, Goods and Capital in the British World, c. 1850–1914 (New York, 2010)CrossRefGoogle Scholar.

82 Van der Eng, “Case of Liability.” French and Belgian firms sometimes followed the practice of incorporating in London free-standing subsidiaries destined for Argentina. Lanciotti, Norma S. and Lluch, Andrea, “Investing in Growing Markets: Opportunities and Challenges for Multinationals in Argentina, 1900–1960,” Management & Organizational History 10, no. 2 (2015): 124–25CrossRefGoogle Scholar.

83 Ville, Simon, “The Institutional Legacy and the Development of an Australian National Innovation System,” in Institutions and Market Economies: The Political Economy of Growth and Development, ed. Garside, W. Rick (Basingstoke: 2007), 120–22Google Scholar.

84 Ville, Simon and Wicken, Olav, “The Dynamics of Resource-Based Economic Development: Evidence from Australia and Norway,” Industrial and Corporate Change 22, no. 5 (2013): 1341–71CrossRefGoogle Scholar.

85 Twomey, Foreign Investment.

86 Jakob Madsen, “Australian Economic Growth and Its Drivers since European Settlement,” in Ville and Withers, Cambridge Economic History, 36, fig 2.2.

87 A good account of the integration of international markets is Topik, Steven C. and Wells, Allen, Global Markets Transformed, 1870–1945 (Cambridge, MA, 2014)Google Scholar.

88 Jackson, Robert V., Australian Economic Development in the Nineteenth Century (Canberra, 1977), 69Google Scholar; Official Year Book of The Commonwealth of Australia, no. 1 (Melbourne, 1908), 501–4.

89 Whitwell, Gregory, Making the Market: The Rise of Consumer Society (Melbourne, 1989), 11–15Google Scholar; Crawford, Robert, “More than Froth and Bubble: Marketing in Australia, 1788–1969,” in The Routledge Companion to Marketing History, ed. Jones, D. G. Brian and Tadajewski, Mark (New York, 2016), 297–314CrossRefGoogle Scholar; Forster, Industrial Development, 230–32, appendix 3.

90 Butlin, Noel, “Colonial Socialism in Australia: 1860–1900,” in The State and Economic Growth, ed. Aitken, Hugh G. J. (New York, 1959), 26–78Google Scholar.

91 There is some multinational literature on each of these countries but little attempt to compare across nations in a generalized fashion. See, for example, Sanders, Andreas R. Dugstad, Sandvik, Pål Thonstad, and Storli, Espen, “Dealing with Globalisation: The Nordic Countries and Inward FDI, 1900–1939,” Business History 58, no. 8 (2016): 1210–35CrossRefGoogle Scholar; “Business Imperialism in South Africa,” special issue, South African Journal of Economic History 11, no. 2 (1996); Paterson, Donald G., British Direct Investment in Canada, 1890–1914 (Toronto, 1976)CrossRefGoogle Scholar; and Jones, Stephen. R. H., Doing Well and Doing Good: Ross and Glendining Scottish Enterprise in New Zealand (Dunedin, 2010)Google Scholar.