There has been a succession of thought provoking articles in the Financial Times and the Economist on the “soul” of multinationals, in part triggered by the debate over whether to welcome Pfizer’s now aborted wish to transfer its headquarters to the UK through acquiring AstraZeneca and also the “Inclusive Capitalism” conference which took place last week, at which various FT and Economist writers spoke.

The Economist has provided some research which helps illuminate the Japanese angle on this debate, which is largely focused on Western companies. According to their “domestic density” index, Toyota is just as Japanese (57%), as IBM (53%), General Electric (63%) or Coca Cola (62%) are American.  The truly global companies tend to be European (Nestle – ony 5% Swiss, Vodafone – only 15% British). AstraZeneca, Pfizer’s erstwhile acquisition target, is actually only 12% “British” in terms of where its sales, employees and shareholders are based and its CEO is from.

Nonetheless, as AstraZeneca is in the process of making a further commitment to the UK, by investing $500m in a new headquarters and R&D site in Cambridge, there was a strong consensus across various stakeholders in the UK that it would be better for the country and the Cambridge scientific cluster if it continued as planned, without possible interference from Pfizer, whose track record in the UK has included building up a significant R&D community around its site in Sandwich in Kent, only to close it after 50 years.

There are plenty of arguments from industry insiders that the future of pharmaceutical R&D lies more with small start ups than large multinationals.  Nonetheless, I personally feel large companies in all industries have a responsibility to maintain communities that they have helped build up.  These communities give people the respect, status and stability that they need in the face of destabilising, centrifugal, globalising forces.

For Japanese companies more than most, employees have non-transferable firm specific skills – and as Martin Wolf put it in the Financial Times last month, this means the employees end up being the major risk bearers in company restructurings, not the shareholders.

The second excellent article in the FT on this was from Andrew Hill, pointing out that being too closely tied or defined by the original nationality of the company is not desirable, however if a multinational company becomes a “globally integrated enterprise” as is the current fashion, if “they use this model merely to relocate operations more frequently, based on considerations of tax, cost and efficiency, they will never build the local links that underpin long-term success.”

Turning back to Japanese companies, and which ones should take most note of the words of Professor Roger Martin of Toronto’s Rotman School of Management, that a clever modern company “has to fall in love with every jurisdiction in which it has a disproportionate amount of resources”, The Economist has a useful table of which Asian firms have the largest foreign sales and therefore resources outside Japan, one assumes – Toyota, Honda, Nissan, Sony, Hitachi, Panasonic, Toshiba, Bridgestone and Canon are all in the top 15.

I wondered which of these companies has a disproportionate amount of resources in Europe.  So I took a look at our Top 30 Japanese companies list, and realised Bridgestone needed to be included, which knocks Bank of Tokyo-Mitsubishi UFJ out of the Top 30.   I have sorted the data according to which companies have the highest proportion of employees in Europe, and therefore need to be “clever modern companies” by falling in love with Europe. 11% is the average.  NSG is way above average, thanks to its acquisition of Pilkington, ditto Horiba and ABX/Schenck, Takeda and Nycomed, Fujitsu and ICL/Fujitsu Siemens, Ricoh/Gestetner, Olympus/Keymed.  I hope to compile more country specific analysis next.

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Last updated by Pernille Rudlin at 2021-03-18.