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West German firms and European industrial co-operation
European Management journal Volume 5 No 3 0 European Management ]ournal 1987 ISSN 0263-2373 $3.00
West German Firms and European Co-operation
Industrial
Sabine Urban Professor, Strasbourg
III
University
and Director,
ZECS, the European
School of Management
Serge Vendermini . Senior Lecturer,
Strasbourg
Ill
University,
The authors have conducted a major statistical study into the attitudes of West German executives towards the key issues of European industriat cooperation. They enquire into the areas in which cooperation might be possible, and uncover the conditions in which it happens. They express much reservation. about the situations in which they find co-operation, and conclude by asking whether there is a stronger way forward.
European
Co-operation
- the Questions
First six, then nine, then ten, then twelve European countries clearly expressed the wish to reinforce their historical, geographical, and cultural links of interdependence and solidarity. The economic integration they hoped to achieve by this institutional coexistence cannot be defined very clearly, since it can be understood in a more or less restrictive sense. However, the fundamental process requires on the one hand, progressive unification of a newly-created market-place, guaranteed by free circulation of commodities, services, capitals, and manpower, and by the absence of any form of discrimination; and on the other hand, harmonisation of development within the various countries and the defining of common policies. In 1987, European ambition has not yet produced a situation which is definitive, or which can even be considered satisfactory in respect of the original
ZECS, the European
School of Management
objectives. Can Europe still afford to divide and disperse her efforts? According to Michel Richonnier, it is becoming urgent to coordinate the steps taken to adapt to change (1). It can be demonstrated that industrial cooperation has indeed a clear tendency to procure the following advantages. 0 cost-reduction, due particularly to scale- and experience-related savings, 0 time-saving in the industrial application of new technological procedures, 0 increased possibilities for taking risks, the latter being shared between several partners. l a more powerful position in world-wide competition (positive domination effect created by the cooperating partners, or their possibility of countering external domination), 0 easier potential access to various public contracts, 0 reduced impact of technical impediments to trade exchanges. It remains to be seen whether this analysis is consciously accepted by the grass-roots of economic and social development, i.e. the firms themselves. Do they see Europe essentially as a space within which special solidarity reigns, enabling them to cooperate effectively on industrial activities liable to enhanoe the international competitiveness of European firms and nations in the face of organised competition from Japan and the U.S.A.? “What constitutes the overall competitiveness of European
206 SABINE URBAN and SERGE VENDERMINI
Industry?” asks Jerome V&non, at the Commission of the European Communities (2). “It is the aptitude of firms within Europe for manufacturing at the prices fixed by international competition on both the European and world markets”. Such is the central preoccupation of the research presented briefly in the following pages (3). Our investigation is based on the Federal Republic of Germany, the dominant economy within the E.E.C. What does Europe actually represent at the moment for West German firms? What do they expect from Europe? Is cooperation on the European scale seen as a valid response to the difficulties they encounter? Is it possible to discern any logical ensemble inciting them to a spirit of cooperation with other European partners? The replies to these and other questions are given in Part I of this paper, which analyses the written answers to a detailed questionnaire filled in by 188 “statistical individuals”. In addition to such data-analysis, it is also necessary to enquire into the substance of European integration: myth or reality. 7 A considerable number of management staff were interviewed, in order to supply at least partial answers to this question, which is capital for the years to come. These results are given in Part II.
Part I Relations between of Germany and Europe
the Federal
Republic
The main point of this research is to isolate any determining factors in industrial cooperation, with a
view to identifying potential candidates for coordinated activities with other European firms. This in turn presupposes a preliminary analysis, to make explicit the relationships between West German industrial firms and the European market, i.e. the impact of the European market on the development strategies of West German firms. Investigating this impact is not a question of sentimental curiosity; rather, it is an essential undertaking for various reasons: It is becoming more and more necessary for European firms to look for non-European outlets, owing to a sort of saturation of the “self-centred” dynamics of the E.E.C. home market. 0 Poor intra-European specialisation often creates tension between European firms. 0 Competition from non-European firms upsets the European market and creates difficulties for European firms. l
Faced with these general conditions, the Federal Republic of Germany has adopted a position which is at the same time both original and unavoidable. Let us observe the following facts: The Federal Republic of Germany’s position on the world market has deteriorated considerably since 1974, as can be seen in Table 1. l This deterioration is largely contingent on a decline in the non-E.E.C. market, including manufactured products. the E.E.C. market itself is quite l However, healthy, and even compensates, to a certain extent. This means that E.E.C.-internal competition is liable to increase, and with it comes the threat of an aggressive sort of profiteering which l
Table 1 Relative Percentage Shares of the Eight Principal Countries in Exports the O.E.C.D. Countries to the Rest of the World (manufactured products (1))
France F.R.G. U.S.A
Japan Italy United Kingdom Netherlands Canada Total
1980
1981
1982
11.1 22.4 19.9 16.5 8.7 11.6 5.1 4.7
10.1 20.6 21.6 19.6 8.4 9.7 4.7 5.3
100.0
100.0
from
1983
1984
1985 (2)
22.0 20.6 19.0 8.7 9.5 4.7 5.6
9.8 21.4 19.8 20.3 8.9 8.9 4.8 6.2
9.3 20.1 20.1 21.9 8.4 8.6 4.4 7.1
9.3 20.5 20.2 21.5 8.3 8.8 4.5 6.9
100.0
100.0
100.0
100.0
9.9
(1) value-equivalent (2) ten-month estimation Sources: OECD-UNSO in MinistPre de I’Economie, Notes Bleues, No. 278, 5-11 May 1986.
des Finances et de la Priuafisafion,
Les
WEST
can hardly development
be propitious to the of European industry.
GERMAN
long-term
West Germany thus occupies a dominant position in the European economy, in spite of the undeniable problems of competitiveness and industrial updating. In view of this, and the facts considered above, it is especially important to know how she sees European reality at present, and what she foresees for the future. What does Europe Represent in the Development Strategies of West German Firms? The following reactions were observed in the firms which we studied (representing the most dynamic currents in the West German economy, and characterised by dynamic adaptational policies): First, the European market is seen as a natural extension of the national market, and is the object of lively export activity. The following
details are significant:
The intensity of the export effort depends on the type of firm. Those firms which export most are principally concerned with mechanical construction, general mechanics, or transport material. The export effort made in recent years, since 1975, is proportional to the degree of export activity existing prior to that date. In other words, the firms which were used to working with foreign markets are those which have invested most in exporting since the crisis. This effort concerns mostly long-standing products, only rarely new products, and virtually never new activities. Although a large majority of these firms are making an effort to diversify, this remains, at least in the first instance, within their own sector. Comparing these factors one with another, we can see that the export effort is clearly an extension of the home market; when gradual diversification takes place within a given sector, the product is first tested on the home market. Once tested and accepted, it is extended into the European market, which is not considered risky, but as a natural extension of the domestic market, and for which basically the same products are offered. Second, Europe is above all a market outlet for West German products rather than a cooperative space for industrial solidarity. l
Two-thirds
of the firms examined considered the
FIRMS
AND
EUROPEAN
INDUSTRIAL
CO-OPERATION
207
E.E.C. to be the principal export market in 1975. In 1982, this figure had dropped slightly, to 60.6 per cent. The main justifications for this dominant position of the E.E.C. as an export market are that the characteristics of West German products are well suited to the requirements of the other E.E.C. countries (similarities in life-style and growth between the Federal Republic of Germany and the other European countries, the geographical proximity of the export markets, and industrial and commercial group relations (organisation of head offices and subsidiaries). Finally, for three-quarters of the firms examined, the E.E.C. market will continue to be the main, and even top-priority market in the years to come. can thus be seen that the creation of large-scale exchanges, allied to the emergence of similar modes of growth in each of the E.E.C. countries, has encouraged considerable development of trade in the products on which this mode of growth is based, especially industrial machinery and goods in the widest sense. This has been particularly beneficial to the Federal Republic of Germany in the last two decades, as can be seen from the manufacturing results in her balance of trade. Third, penetration of the European market depends on the product’s suitability to market requirements, and an inherent technological advantage. Having identified the E.E.C. market itself, it is clearly essential to examine the means of penetrating it, in terms of advantages over the competition. In addition, it would also be interesting to know whether the European market has any specific requirements as far as competitive policy is concerned. Our enquiry has produced a certain number results concerning advantages over competitors.
of
0 The major advantages needed to take a product into the European market are its suitability to market requirements and its technological strongpoints. l No more than a quarter of the firms mention price-related penetration of West German products. l Arguments based mainly on commercial features (good image, customer relations, or commercial methods) remain secondary in the construction of European market policy. This order of the variables involved in competition is
208 SABINE URBAN and SERGE VENDERMINI more or less identical for the home market, although some slight differences must be mentioned. Firstly, the “price effect” is more significant inside West Germany than on the European market. The German customer is price-conscious, and the price is often seen as a feature which is necessary to resist foreign competition. Secondly, commercially-based arguments (customer-relations, public image, aftertimes . . .) play a more sales service, delivery significant role at home than on the European market, where the prestige conferred by the “madein-Germany” label seems to allow a more lax ,approach. Fourth, West German firms are purchasing more of their supplies on the European market, but especially with a view to obtaining better prices. With the various European markets representing a growing outlet for West German industry, is there a connected tendency towards increasing dependency on these same markets as far as supply-purchasing is concerned? This would be the logical consequence of harmonious international division of labour. On the other hand, is increasing competition on both European and West German markets only a symptom of poor specialisation within Europe, creating great tension between European firms in trading within the community? The second of these tendencies appears to be the predominant one, illustrated in particular by the reconquering of the Community’s markets in the face of increased competition from outside Europe. Within this context, and from the firms’ own point of view, we have attempted to estimate the evolution of their reliance on the European market, especially for purchasing material and equipment. It can be seen that: 0 This form of reliance for supply-purchasing concerns one-third of the firms examined. 0 Reliance for industrial goods (material purchased on the E.E.C. market equivalent to over 15 per cent of. investments) concerns rather less than one quarter of firms today. However, this figure is less significant in its own right than the arguments in favour of choosing a European supplier. When West German firms turn to E.E.C. partners for supply purchasing, it is, in order of priority, for reasons of price, absence of a suitable product on the home market, and technological criteria (N.B. the low priority of this last parameter). Fifth, the most outward-looking West German firms adopt a comprehensive view. These firms operate by understanding the essential features which link the
intensity of export effort on the one hand with the types of policies applied on relations with the European market on the other. This analysis brings out the following
points:
~IlUIl~tXll 011 a d policy ~UllCj’ 01 diversUIVCZIS0 Export effort is contingent on of ification within A&an111 the .-ie firm, but. which does not go beyond the- ‘-IL--Is latter’s usual sector of activity. l An intense : export C,X~UI t effort is highly contingent on -It -veil-established products. the exporting:-- of well-established l An intense export effort corresponds to the choice of the E.E.C. as theLe main market, and to a certain conception of thisis market’s future role as a priority outlet. l Advantages linked to export-performance are a technological lead, product suitability, and, in certain cases, the quality of customer-relations.
What Forms of Industrial Cooperation can be Envisaged on the European Scale?
Do West German firms wish to cooperate? why? What is their decision-making logic?
If so,
The question of European industrial solidarity is posed in rather confused terms in West Germany. From an historical point of view, but also for the future, the E.E.C. is seen as the principal export outlet, which will remain an important priority. West German firms have achieved export success in this market through product quality and technological advantages, and purchase their supplies on it for reasons of price or through necessity. They thus feel that they have some sort of noble advantage in this market-place, which ensures them a dominant position in the short-term future. This should reinforce the feeling that the E.E.C. is, and should remain, essentially an enormous exchange market. The process of economic integration remains, and can apparently continue to remain, unfinished. competition is increasing on the Nevertheless, E.E.C. market. This process could mean that it will become necessary to cooperate, and to consider the E.E.C. as the framework for industrial cooperation, in order to ensure better internal organisation of exchanges between member-states, greater capacity for resisting competition from without, and an opportunity to implement technological changes with greater efficiency. In the final analysis, it is only with some caution that West German firms appear to express their desire to cooperate at the European level. Only approximately one third of them give a positive response to the general idea of European industrial cooperation.
WEST GERMAN
Once the content of this cooperation has been specified, the answers are clearer. Research and Development is the field which obtains the best response; cooperation in technical matters, knowhow, and finance is viewed favourably by about one third or more of the firms questioned, whereas cooperation involving protection of European markets through tariffs or quotas is quite clearly rejected. It is quite obvious that the desire to cooperate increases as the question becomes less closely related to the market itself (see Diagram 1). We have thus identified the link between the desire to cooperate and the various stages of the creationcommercialisation process (the possibility of cooperation being much more favourably viewed at stages well removed from the customer, i.e. in fundamental research, development, or the manufacturing of the component parts of a product). It is now interesting to delve more deeply into the reasons why firms embark on cooperation, by elucidating the discriminating factors given by the population “in favour” and those given by the opponents of cooperation. For both types of population, this discrimination has been applied to the three cooperation procedures deemed desirable or conceivable for the firms concerned, viz: Research and Development 0 Finance l Know-how l
The aim of the data-analysis carried out was to determine which variables are linked to which form of cooperation for the firms, the latter being defined according to characteristic variables.
I
Research and Development
1
Applicalion: -Industrial: l know-how wechnical impacts ilSptX,* - linancial: *funding *credit
I
Market: - Protection of European markets l through tariffs l through quobx *other -shared commercial activities of limls
l
FIRMS AND EUROPEAN INDLJSTRLtL
CO-OPERATION
209
1. Typical profile of candidates@ cooperation in Researchand Development
By making up a contingency table, it was possible to obtain a first series of observations, which can be summed up as follows. The position of the European market, and the way it is looked upon by firms, do not determine any fixed attitude towards cooperation in Research and Development. On the other hand, certain advantages over competitors are definitely associated with a desire to cooperate in Research and Development. Success related to the firm’s image, and especially to its cusotmer-relations, seems to determine a very clear attitude towards cooperation in this field. Finally, a desire to cooperate in Research and Development is clearly associated with certain features of post-1975 export effort, as well as with investment effort. In order accurately to identify the system which determines a desire to cooperate in Research and Development, a segmented analysis of the data was conducted. Our aim was to discover a homogeneous division of firms according to their desire to cooperate, using successive dichotomies obtained by the explanatory-variable procedure. The idea behind this method is to identify quite clearly the desire to cooperate, by simply examining the terms of the discriminatory variables. The segmentation applied to this domain allows us to put forward the following results concerning willingness to cooperate: Advantages: a desire
to cooperate exists more particularly in firms whose known advantages are in close harmony with their commercial policies. The firms which are most amenable to cooperation in Research and Development are those which have good arguments over the competition, especially on the domestic market, as far as public image and customer-relations are concerned. Industrial application policies: the firms most amenable to Research and Development cooperation are principally those which have seen little post-1975 growth of their foreign outlets. For those which have had considerable export development since that date, only a very active Research and Development policy can create a context which encourages them, even vaguely, to cooperate.
Diagram 1 Willingnessto cooperateandform of cooperation required Comparison
of these
two
types
of relationship
210
SABINE
URBAN
and SERGE
VENDERMINI
suggests the following conclusion. For our population, a desire to cooperate in Research and Development only concerns firms which have had market difficulties, especially in the export field, and which cannot go beyond their present advantages, based as they are on a policy of commercial relations. Consequently, reinvestment in Research and Development appears necessary, for the creation of for example. Hence Research and new products, Development cooperation on a European level is more favourably viewed, since it guarantees greater .efficiency and stab&es competition. In other words, to cooperate in in our sample, the firms willing Research and Development are not the most dynamic ones (in terms of high growth-rates), but rather those which are seeking new industrial vigour.
2.
Typical profile of candidates forfinancial
The contingency
table reveals
cooperation
the following:
0 Neither the firms’ own characteristics, nor the present weight and position of the European market are determining factors in willingness to cooperate on a financial level. the way in which the European 0 Similarly, market’s future is assessed, and consequent reliance on this market in years to come, to either a greater or a lesser extent, do not contribute to a special desire to cooperate in this field. 0 On the other hand, an unfavourable post-1975 growth record encourages financial cooperation. 0 Finally, certain advantages over the competition such as the argument that products are well suited to market-requirements, enjoy particular technological advantages, or are highly specialised - seem to preclude any desire for financial cooperation with other European firms. A segmented analysis following facts:
provides
confirmation
of the
Openly declaring advantages of productsuitability over competitors largely excludes any desire to cooperate financially. 0 If, in addition, there has been considerable post1975 growth of outlets, financial cooperation is quite out of the question. l
Above all, this segmentation enables us to identify the dynamic process of the refusal of financial cooperation. The firms rejecting such links are the dynamic ones, which have seen good post-1975 growth of outlets, and’which are highly competitive through good product suitability, careful specialisa-
lion, or strong relative advantages in the technological field. Such reserve on the part of West German firms can no doubt be explained by the fact that the West German financial system is well suited to the development requirements of the most commercially dynamic firms (high growth-rate of outlets), those whose indisputable qualifications in production are also likely to inspire confidence among bankers. In most market-economy counties, the best elements of the production system experience no difficulty in finding the financial resources they need. Only when massive resources are required is there a tendency to look towards financial cooperation. In short, while the factors contributing to a desire to engage in financial cooperation are not clearly defined, the conditions which preclude such a desire are quite obvious. Once again, cooperation is not perceived in positive terms, but rather as a means of compensating for certain weaknesses. For the moment, good individual performance on the industrial level, and the concept of financial cooperation on a European scale are not really related. In addition to the point raised in the previous paragraph, we must keep in mind the possible unwieldiness of such activities, and the logical distaste of firms for public or private bureaucracy in all its forms (an aversion which is justified by the fact that such red-tape involves higher operating costs). 3. Typical profile of candidatesfor cooperationin knowhow The contingency-table of the variables which differentiate the firms in favour of “know-how” cooperation from its opponents provides the following information: 0 the importance of the European market as an export outlet, and the degree of competition involved, are obvious determining factors in the desire to cooperate. 0 openly declaring advantages of product suitability on both the West German and European markets excludes any desire to cooperate in know-how. 0 the same applies to firms with a good post-1975 export record. In addition, carried out.
two other segmented analyses were
0 The variables “importance of the European market” and “degree of competition involved” would appear to be determining factors for a
wEs’r
tiERMAN
desire to cooperate in know-how. They concq in the following manner: keenly-felt competition on the European market coincides with a desire to cooperate in this field, whereas for firms which have not felt much competition in Europe, in spite of long-standing activity in this market (which is their first export market), there is virtually no desire to cooperate. l When it comes to the variables “advantages over competitors”, the segmentation is quite clear: a declared advantage of product suitability virtually excludes any desire to cooperate in know-how. In short, for the three forms of cooperation judged statistically possible, examination of the factors which are decisive for the firms declaring themselves for or against these forms of cooperation suggests two ideas: 1. European-scale cooperation seems above all to be a rescue-operation for firms in difficulty, and this very obvious for two categories. Firms having had export-market difficulties in recent years, and whose advantages over the competition have dwindled. In these cases, a clear desire to cooperate in Research and Development is expressed, and is certainly seen as a short-cut to reappropriation of the early stages of the industrial process (creation of new products). Firms with a poor market position, and subject to strong competition within Europe: in these cases, cooperation in know-how receives a special mention, and is certainly viewed as a desirable form of collaboration, allowing firms to withstand competition. 2. European-scale industrial cooperation is rejected explicitly by healthy firms especially, even in areas far removed from the market place itself (such as R and D, industrial application, finance, or know-how); there are two main reasons for this. An unwillingness to dilute existing advantages, knowing that the European market is still favourable to, and likely to be conquered by, such decisive advantages as product suitability. Reticence to change the balance of competition on the European market, knowing that where this market has been occupied over a long period, with competition remaining at a subjectively low level, there is no call to change the rules of the game and start cooperating.
FIRMS
Part II
AND
EUROPEAN
INDUSTRIAL
European Integration:
CO-OPERATION
211
Myth or Reality?
It is quite obvious that Europe is a platform for speeches: political speeches given periodically at spectacular summit meetings, private speeches often coloured with sentimentalism, or romantic humanism, or speeches made by businessmen fully aware of the spirit of conquest and the power of domination. But the content of these speeches is often far removed from the reality they discuss. The interviews conducted for this study have revealed that industrial firms have a certain number of reservations in respect of European integration (I), that the other partners in the socio-cultural context are hesitant (II), but that it is nevertheless possible to detect the early beginnings of what might become stronger alliances (III). Reservations Expressed by Firms with Regard to European Integration In the widest possible sense, European integration implies some form of common policy, and therefore a whole list of constraints; it also supposes a will to cooperate and to harmonise private initiatives, while respecting the demands of the complex set of interests and advantages of each partner. From this point of view, West German firms react somewhat hesitantly, in strategic terms, towards Europe. 1.
Europe, a superfluous organisation
First and foremost, Europe is seen as a market-place; a sales-outlet in which it is possible to assume a dominant position (for West German firms) through technology, through a recognised competence acquired from a long and brilliant industrial tradition steeped in the mastery of both the physical and chemical sciences, and through constant attention to market requirements. The very fact that a product is well-suited to the demand naturally means that the West German firm is not going to sabotage this advantage, and will therefore reject any form of cooperation which is organically close to the commercialisation of goods or services. This being the case, European scale industrial cooperation is refused with a certain amount of managerial pride. “Why cooperate, when we have proved our strength, our command of technology; our economic superiority, and our capacity to adapt adequately to change, with things as they are?” This is an opinion frequently expressed by West German market leaders.
212
SABINE
URBAN
and
SERGE
VENDERMINI
2.
Europe, an inoperative organisation
Industrial cooperation within Europe tends to be refused because it is judged inoperative. There is a growing feeling that industrial Europe is weakening. What seems most appropriate is cooperation with the most advanced companies worldwide. Mistrust of Europe seems to grow as a function of the internationalisation of companies beyond European frontiers. The countries of Europe are also characterised by relatively similar forms of social organisation, implying similar structures of costs and obligatory payments. The advantages of one area of the E.E.C. over another are therefore quite limited, and restrict the interest of cooperation on production or partial delocalisation of activity (through joint ventures, for example). The existence of significantly distinct technical norms, on the other hand, reinforces the temptation, or the necessity, to cooperate. Progressively harmonising European norms in the future will undoubtedly weaken this argument, which favours a more or less forced form of cooperation. As far as international sub-contracting is concerned, it is once again a question of an obligation, economic this time, rather than a positive desire to cooperate; this form of cooperation is most frequently organised in order to take advantage of excess production capacity, and only rarely in a quest for technical complementarity, which could be a more systematic feature. Some isolated experiments have, however, been carried out recently, to pioneer cooperation in developing new products or procedures, involving more especially French and West German small-tomedium firms. Hesitation
by Partners
in the Socio-Cultural
Context
Industrial firms are undeniably an essential component of West German economic life; they cannot, however, be dissociated from the other links in the social chain (public administration, private individuals, financial institutions. . .). From this point of view, West German society suffers from institutional and cultural restraints as far as European integration is concerned. 1.
Institutional
restraints
It is especially the field of Research and Development which is affected by institutional restraints. West German firms enjoy certain privileges, conferred on them by arrangements which are “regional” (i.e. “state”-organised at “Land” or province level). In most cases, grants are given to “regional” companies, in the hope that the economy
of the “Land” will later benefit from the research undertaken. Such dispersion of public moneys does not yet appear to be a part of the spending system of the political powers in other national territories (and a firtiori in European countries). Any European-scale coordination agreement would obviously require a profound change in mentalities which are still deeply steeped in national egocentricity. In addition, public and private funds made available in the Federal Republic of Germany have long been considerably higher than in France, in both absolute and relative terms. It is easy to understand why sharing accumulated advantages does not appeal spontaneously to “partners” who are often competitors on the same markets. Finally, it must be pointed out that in some sectors (especially textiles) R and D is undertaken with the support of professional organisa tions (Verbiinde), which once again take a national (as opposed to European) view of the problems involved. On the whole, the Public Authorities appear as the necessary defenders of national employment. They therefore tend to give preference to chauvinistic measures of short-term national interest, relegating to the background long-term industrial development strategy and the constraints of economic rationality. 2.
Reservations of cultural origin
These are diversely l
expressed:
The liberal doctrine of the Freiburg school, and neo-liberal economic theories have deeply influenced attitudes, and conditioned the reactions of management, both public and private, ever since the end of World War II. In this approach, a firm’s competitivenessis stimulated more by competition than by cooperation. The concept of “organised competition” is explicitly refused, even if there is clear evidence that such practices do indeed exist. Numerous heads of industry, the victims of a sort of ideological smokescreen in certain cases, operate with a de facto mistrust of industrial cooperation, which they see as a hamper to competition, an interference by technocrats, and a prejudicial control of company decisions and of decentralised initiztive. A European industrial policy is often seen as an element of confusion in the natural, efficient working of the market. Similarly, there is not, as yet, a very positive opinion of the potential efficiency of the European Community Institutions .
WEST
GERMAN
What industrialists expect from the E.E.C. authorities is not so much definite mea&res concerning specific points of European industrial policy (only 13 per cent of the firms answering expressed this opinion). Rather, they simply allude to the creation of “an overall climate favourable to initiative-taking” (87 per cent of the answers). 0 In a context of liberal culture, decentralised activity, and active regional life, bureaucratic French centralisation and state-interference give rise to clearly-expressed suspicion. Desire to cooperate with France is far from being openly declared. French protectionism, in its more or less surreptitious and unavowed forms, is seen as a dishonest and abusive practice, as though reciprocity did not exist in a game presented in these Manichean terms. The management staff interviewed delight in cultivating a highly-contrasted picture with, on the one hand, the merits of a clearly defined market economy, in which competitiveness actually stems from competition itself, and on the other hand, the rather hackneyed advantages of cooperation organised against a backcloth of Colbertism deeply entrenched in the French consciousness, and leading to pervasive bureaucratic centralisation. Beyond these reserved attitudes, some new ideas are nevertheless emerging, which could lead to efficient cooperation.
Part III
The Way to New Alliances
In an organisational framework that is somewhat confused, there is no lack of positive initiatives. Whatever reservations may be expressed towards the very principle of European-scale cooperation, whatever the hesitation, it is impossible to state that a desire to cooperate does not exist. There have been some perfectly successful industrial experiments, which provide valuable information; in other cases, embarking on a programme of cooperation involves complications arising from practical applications, and is not actually refuted on strategical or tactical grounds. The supervisory procedures implemented by the COCOM (Coordination Committee for Multilateral Export Controls) make West German firms quite aware of the interest of a certain degree of technological autonomy. The interviews conducted have revealed a certain number of conditions which are necessary in order to avoid the disappointment which would accom-
FIRMS
AND
EUROPEAN
pany unsuccessful attempts:
INDUSTRIAL
or
CO-OPERATION
ill-managed
213
cooperation
1. Cooperation activities require clear definition of the objectives of the undertaking. Each partner’s motivations must be totally explicit. The advantage of fixing the objectives in this manner is that heads of firms are thus forced to think seriously about what is materially possible and desirable, and at the same time to specify the way in which these objectives may be appreciated a pos teriori.
2. Once the objectives have been determined in this way, the next phase concerns the methodical organisation of cooperation activities. In each of the various firms involved, agreement must be reached on the following points in particular. Accurate analysis of the problems to be dealt with, and of the technical, commercial, and financial parameters involved; l Coordinated time-planning of cooperation activities; l Designation of the persons responsible in each of the organisations taking part (and capable of using a common language); l Follow-up of cooperation activities. l
In the case of long and complex operations, a “task force” is probably not sufficient for completing the activity undertaken, and in such cases must be seconded by a specifically created “management committee”. 3. Cooperation supposes mutual confidence between the partners, and fair sharing of profits. Confidence is not something that can be enforced by order; it evolves out of practice. Consequently, cooperation activities undertaken as part of a set of operations appear more promising than “oneoff” collaborations. 4. The cooperation
must take place at the appropriate firms or industrial groups), or with interested partners (relations between firms or branches).
hierarchical level (within
5. It may be an advantage to approach cooperation in a gradual manner, step-&y-step, or even to imagine intermediary forms which create less reticence than direct inter-company or intergroup cooperation: l l
Indirect Indirect
cooperation, cooperation
through suppliers; implemented by research
214
SABLNE
URBAN
and SERGE
VENDERMINI
institutions or common professional organisations; l Indirect cooperation can also be established via professional associations (Verbande), whose task is to harmonise technical norms and fiscal laws at European level. At all events, large firms, or important mediumsized firms, are better equipped in terms of manpower and general organisation than small firms when it comes to undertaking and managing these various forms of cooperation, which will only be effective if all participants feel that they are really involved in some useful way. 6. Industrial cooperation has a greater chance of being accepted if there exists a broad-minded cultural attitude; mutual distrust tends to diminish as the partners involved get to know each other better. School or university training programmes, travel, cultural exchanges, information pro-
grammes, and the image given by the press and the media all have an essential role to play in this process. References 1. M. Richonnier: Les Me’tamorphosesde I’Europe de 2769 li 2001, Flammarion, Paris, 1985. 2. See J. Vigneron, “Sept ans pour construire le vrai Marche commun,” Economic prospective lnternationale, Review of the CEPIZ, 1st quarter 1986, p. 11. 3. A detailed account has been published in No. 2 (March 1986) of Etudes et Recherchesdu Conzmissariat G&Pm1 du Plan: Enteprises Allemandes et Coopt+ation Industrielle li 1’6chelle europt?enne. La Documentation francaise, Paris. 4. See Sachverstbndigenrat; ZUY Begutachtung der gesamtzoirtschaftlichen Entwicklung: \ahresgutachten 2985/86. W. Kohlhammer, Stuttgart and Mainz, 1986.
West German Firms and European Co-operation
Industrial
Sabine Urban Professor, Strasbourg
III
University
and Director,
ZECS, the European
School of Management
Serge Vendermini . Senior Lecturer,
Strasbourg
Ill
University,
The authors have conducted a major statistical study into the attitudes of West German executives towards the key issues of European industriat cooperation. They enquire into the areas in which cooperation might be possible, and uncover the conditions in which it happens. They express much reservation. about the situations in which they find co-operation, and conclude by asking whether there is a stronger way forward.
European
Co-operation
- the Questions
First six, then nine, then ten, then twelve European countries clearly expressed the wish to reinforce their historical, geographical, and cultural links of interdependence and solidarity. The economic integration they hoped to achieve by this institutional coexistence cannot be defined very clearly, since it can be understood in a more or less restrictive sense. However, the fundamental process requires on the one hand, progressive unification of a newly-created market-place, guaranteed by free circulation of commodities, services, capitals, and manpower, and by the absence of any form of discrimination; and on the other hand, harmonisation of development within the various countries and the defining of common policies. In 1987, European ambition has not yet produced a situation which is definitive, or which can even be considered satisfactory in respect of the original
ZECS, the European
School of Management
objectives. Can Europe still afford to divide and disperse her efforts? According to Michel Richonnier, it is becoming urgent to coordinate the steps taken to adapt to change (1). It can be demonstrated that industrial cooperation has indeed a clear tendency to procure the following advantages. 0 cost-reduction, due particularly to scale- and experience-related savings, 0 time-saving in the industrial application of new technological procedures, 0 increased possibilities for taking risks, the latter being shared between several partners. l a more powerful position in world-wide competition (positive domination effect created by the cooperating partners, or their possibility of countering external domination), 0 easier potential access to various public contracts, 0 reduced impact of technical impediments to trade exchanges. It remains to be seen whether this analysis is consciously accepted by the grass-roots of economic and social development, i.e. the firms themselves. Do they see Europe essentially as a space within which special solidarity reigns, enabling them to cooperate effectively on industrial activities liable to enhanoe the international competitiveness of European firms and nations in the face of organised competition from Japan and the U.S.A.? “What constitutes the overall competitiveness of European
206 SABINE URBAN and SERGE VENDERMINI
Industry?” asks Jerome V&non, at the Commission of the European Communities (2). “It is the aptitude of firms within Europe for manufacturing at the prices fixed by international competition on both the European and world markets”. Such is the central preoccupation of the research presented briefly in the following pages (3). Our investigation is based on the Federal Republic of Germany, the dominant economy within the E.E.C. What does Europe actually represent at the moment for West German firms? What do they expect from Europe? Is cooperation on the European scale seen as a valid response to the difficulties they encounter? Is it possible to discern any logical ensemble inciting them to a spirit of cooperation with other European partners? The replies to these and other questions are given in Part I of this paper, which analyses the written answers to a detailed questionnaire filled in by 188 “statistical individuals”. In addition to such data-analysis, it is also necessary to enquire into the substance of European integration: myth or reality. 7 A considerable number of management staff were interviewed, in order to supply at least partial answers to this question, which is capital for the years to come. These results are given in Part II.
Part I Relations between of Germany and Europe
the Federal
Republic
The main point of this research is to isolate any determining factors in industrial cooperation, with a
view to identifying potential candidates for coordinated activities with other European firms. This in turn presupposes a preliminary analysis, to make explicit the relationships between West German industrial firms and the European market, i.e. the impact of the European market on the development strategies of West German firms. Investigating this impact is not a question of sentimental curiosity; rather, it is an essential undertaking for various reasons: It is becoming more and more necessary for European firms to look for non-European outlets, owing to a sort of saturation of the “self-centred” dynamics of the E.E.C. home market. 0 Poor intra-European specialisation often creates tension between European firms. 0 Competition from non-European firms upsets the European market and creates difficulties for European firms. l
Faced with these general conditions, the Federal Republic of Germany has adopted a position which is at the same time both original and unavoidable. Let us observe the following facts: The Federal Republic of Germany’s position on the world market has deteriorated considerably since 1974, as can be seen in Table 1. l This deterioration is largely contingent on a decline in the non-E.E.C. market, including manufactured products. the E.E.C. market itself is quite l However, healthy, and even compensates, to a certain extent. This means that E.E.C.-internal competition is liable to increase, and with it comes the threat of an aggressive sort of profiteering which l
Table 1 Relative Percentage Shares of the Eight Principal Countries in Exports the O.E.C.D. Countries to the Rest of the World (manufactured products (1))
France F.R.G. U.S.A
Japan Italy United Kingdom Netherlands Canada Total
1980
1981
1982
11.1 22.4 19.9 16.5 8.7 11.6 5.1 4.7
10.1 20.6 21.6 19.6 8.4 9.7 4.7 5.3
100.0
100.0
from
1983
1984
1985 (2)
22.0 20.6 19.0 8.7 9.5 4.7 5.6
9.8 21.4 19.8 20.3 8.9 8.9 4.8 6.2
9.3 20.1 20.1 21.9 8.4 8.6 4.4 7.1
9.3 20.5 20.2 21.5 8.3 8.8 4.5 6.9
100.0
100.0
100.0
100.0
9.9
(1) value-equivalent (2) ten-month estimation Sources: OECD-UNSO in MinistPre de I’Economie, Notes Bleues, No. 278, 5-11 May 1986.
des Finances et de la Priuafisafion,
Les
WEST
can hardly development
be propitious to the of European industry.
GERMAN
long-term
West Germany thus occupies a dominant position in the European economy, in spite of the undeniable problems of competitiveness and industrial updating. In view of this, and the facts considered above, it is especially important to know how she sees European reality at present, and what she foresees for the future. What does Europe Represent in the Development Strategies of West German Firms? The following reactions were observed in the firms which we studied (representing the most dynamic currents in the West German economy, and characterised by dynamic adaptational policies): First, the European market is seen as a natural extension of the national market, and is the object of lively export activity. The following
details are significant:
The intensity of the export effort depends on the type of firm. Those firms which export most are principally concerned with mechanical construction, general mechanics, or transport material. The export effort made in recent years, since 1975, is proportional to the degree of export activity existing prior to that date. In other words, the firms which were used to working with foreign markets are those which have invested most in exporting since the crisis. This effort concerns mostly long-standing products, only rarely new products, and virtually never new activities. Although a large majority of these firms are making an effort to diversify, this remains, at least in the first instance, within their own sector. Comparing these factors one with another, we can see that the export effort is clearly an extension of the home market; when gradual diversification takes place within a given sector, the product is first tested on the home market. Once tested and accepted, it is extended into the European market, which is not considered risky, but as a natural extension of the domestic market, and for which basically the same products are offered. Second, Europe is above all a market outlet for West German products rather than a cooperative space for industrial solidarity. l
Two-thirds
of the firms examined considered the
FIRMS
AND
EUROPEAN
INDUSTRIAL
CO-OPERATION
207
E.E.C. to be the principal export market in 1975. In 1982, this figure had dropped slightly, to 60.6 per cent. The main justifications for this dominant position of the E.E.C. as an export market are that the characteristics of West German products are well suited to the requirements of the other E.E.C. countries (similarities in life-style and growth between the Federal Republic of Germany and the other European countries, the geographical proximity of the export markets, and industrial and commercial group relations (organisation of head offices and subsidiaries). Finally, for three-quarters of the firms examined, the E.E.C. market will continue to be the main, and even top-priority market in the years to come. can thus be seen that the creation of large-scale exchanges, allied to the emergence of similar modes of growth in each of the E.E.C. countries, has encouraged considerable development of trade in the products on which this mode of growth is based, especially industrial machinery and goods in the widest sense. This has been particularly beneficial to the Federal Republic of Germany in the last two decades, as can be seen from the manufacturing results in her balance of trade. Third, penetration of the European market depends on the product’s suitability to market requirements, and an inherent technological advantage. Having identified the E.E.C. market itself, it is clearly essential to examine the means of penetrating it, in terms of advantages over the competition. In addition, it would also be interesting to know whether the European market has any specific requirements as far as competitive policy is concerned. Our enquiry has produced a certain number results concerning advantages over competitors.
of
0 The major advantages needed to take a product into the European market are its suitability to market requirements and its technological strongpoints. l No more than a quarter of the firms mention price-related penetration of West German products. l Arguments based mainly on commercial features (good image, customer relations, or commercial methods) remain secondary in the construction of European market policy. This order of the variables involved in competition is
208 SABINE URBAN and SERGE VENDERMINI more or less identical for the home market, although some slight differences must be mentioned. Firstly, the “price effect” is more significant inside West Germany than on the European market. The German customer is price-conscious, and the price is often seen as a feature which is necessary to resist foreign competition. Secondly, commercially-based arguments (customer-relations, public image, aftertimes . . .) play a more sales service, delivery significant role at home than on the European market, where the prestige conferred by the “madein-Germany” label seems to allow a more lax ,approach. Fourth, West German firms are purchasing more of their supplies on the European market, but especially with a view to obtaining better prices. With the various European markets representing a growing outlet for West German industry, is there a connected tendency towards increasing dependency on these same markets as far as supply-purchasing is concerned? This would be the logical consequence of harmonious international division of labour. On the other hand, is increasing competition on both European and West German markets only a symptom of poor specialisation within Europe, creating great tension between European firms in trading within the community? The second of these tendencies appears to be the predominant one, illustrated in particular by the reconquering of the Community’s markets in the face of increased competition from outside Europe. Within this context, and from the firms’ own point of view, we have attempted to estimate the evolution of their reliance on the European market, especially for purchasing material and equipment. It can be seen that: 0 This form of reliance for supply-purchasing concerns one-third of the firms examined. 0 Reliance for industrial goods (material purchased on the E.E.C. market equivalent to over 15 per cent of. investments) concerns rather less than one quarter of firms today. However, this figure is less significant in its own right than the arguments in favour of choosing a European supplier. When West German firms turn to E.E.C. partners for supply purchasing, it is, in order of priority, for reasons of price, absence of a suitable product on the home market, and technological criteria (N.B. the low priority of this last parameter). Fifth, the most outward-looking West German firms adopt a comprehensive view. These firms operate by understanding the essential features which link the
intensity of export effort on the one hand with the types of policies applied on relations with the European market on the other. This analysis brings out the following
points:
~IlUIl~tXll 011 a d policy ~UllCj’ 01 diversUIVCZIS0 Export effort is contingent on of ification within A&an111 the .-ie firm, but. which does not go beyond the- ‘-IL--Is latter’s usual sector of activity. l An intense : export C,X~UI t effort is highly contingent on -It -veil-established products. the exporting:-- of well-established l An intense export effort corresponds to the choice of the E.E.C. as theLe main market, and to a certain conception of thisis market’s future role as a priority outlet. l Advantages linked to export-performance are a technological lead, product suitability, and, in certain cases, the quality of customer-relations.
What Forms of Industrial Cooperation can be Envisaged on the European Scale?
Do West German firms wish to cooperate? why? What is their decision-making logic?
If so,
The question of European industrial solidarity is posed in rather confused terms in West Germany. From an historical point of view, but also for the future, the E.E.C. is seen as the principal export outlet, which will remain an important priority. West German firms have achieved export success in this market through product quality and technological advantages, and purchase their supplies on it for reasons of price or through necessity. They thus feel that they have some sort of noble advantage in this market-place, which ensures them a dominant position in the short-term future. This should reinforce the feeling that the E.E.C. is, and should remain, essentially an enormous exchange market. The process of economic integration remains, and can apparently continue to remain, unfinished. competition is increasing on the Nevertheless, E.E.C. market. This process could mean that it will become necessary to cooperate, and to consider the E.E.C. as the framework for industrial cooperation, in order to ensure better internal organisation of exchanges between member-states, greater capacity for resisting competition from without, and an opportunity to implement technological changes with greater efficiency. In the final analysis, it is only with some caution that West German firms appear to express their desire to cooperate at the European level. Only approximately one third of them give a positive response to the general idea of European industrial cooperation.
WEST GERMAN
Once the content of this cooperation has been specified, the answers are clearer. Research and Development is the field which obtains the best response; cooperation in technical matters, knowhow, and finance is viewed favourably by about one third or more of the firms questioned, whereas cooperation involving protection of European markets through tariffs or quotas is quite clearly rejected. It is quite obvious that the desire to cooperate increases as the question becomes less closely related to the market itself (see Diagram 1). We have thus identified the link between the desire to cooperate and the various stages of the creationcommercialisation process (the possibility of cooperation being much more favourably viewed at stages well removed from the customer, i.e. in fundamental research, development, or the manufacturing of the component parts of a product). It is now interesting to delve more deeply into the reasons why firms embark on cooperation, by elucidating the discriminating factors given by the population “in favour” and those given by the opponents of cooperation. For both types of population, this discrimination has been applied to the three cooperation procedures deemed desirable or conceivable for the firms concerned, viz: Research and Development 0 Finance l Know-how l
The aim of the data-analysis carried out was to determine which variables are linked to which form of cooperation for the firms, the latter being defined according to characteristic variables.
I
Research and Development
1
Applicalion: -Industrial: l know-how wechnical impacts ilSptX,* - linancial: *funding *credit
I
Market: - Protection of European markets l through tariffs l through quobx *other -shared commercial activities of limls
l
FIRMS AND EUROPEAN INDLJSTRLtL
CO-OPERATION
209
1. Typical profile of candidates@ cooperation in Researchand Development
By making up a contingency table, it was possible to obtain a first series of observations, which can be summed up as follows. The position of the European market, and the way it is looked upon by firms, do not determine any fixed attitude towards cooperation in Research and Development. On the other hand, certain advantages over competitors are definitely associated with a desire to cooperate in Research and Development. Success related to the firm’s image, and especially to its cusotmer-relations, seems to determine a very clear attitude towards cooperation in this field. Finally, a desire to cooperate in Research and Development is clearly associated with certain features of post-1975 export effort, as well as with investment effort. In order accurately to identify the system which determines a desire to cooperate in Research and Development, a segmented analysis of the data was conducted. Our aim was to discover a homogeneous division of firms according to their desire to cooperate, using successive dichotomies obtained by the explanatory-variable procedure. The idea behind this method is to identify quite clearly the desire to cooperate, by simply examining the terms of the discriminatory variables. The segmentation applied to this domain allows us to put forward the following results concerning willingness to cooperate: Advantages: a desire
to cooperate exists more particularly in firms whose known advantages are in close harmony with their commercial policies. The firms which are most amenable to cooperation in Research and Development are those which have good arguments over the competition, especially on the domestic market, as far as public image and customer-relations are concerned. Industrial application policies: the firms most amenable to Research and Development cooperation are principally those which have seen little post-1975 growth of their foreign outlets. For those which have had considerable export development since that date, only a very active Research and Development policy can create a context which encourages them, even vaguely, to cooperate.
Diagram 1 Willingnessto cooperateandform of cooperation required Comparison
of these
two
types
of relationship
210
SABINE
URBAN
and SERGE
VENDERMINI
suggests the following conclusion. For our population, a desire to cooperate in Research and Development only concerns firms which have had market difficulties, especially in the export field, and which cannot go beyond their present advantages, based as they are on a policy of commercial relations. Consequently, reinvestment in Research and Development appears necessary, for the creation of for example. Hence Research and new products, Development cooperation on a European level is more favourably viewed, since it guarantees greater .efficiency and stab&es competition. In other words, to cooperate in in our sample, the firms willing Research and Development are not the most dynamic ones (in terms of high growth-rates), but rather those which are seeking new industrial vigour.
2.
Typical profile of candidates forfinancial
The contingency
table reveals
cooperation
the following:
0 Neither the firms’ own characteristics, nor the present weight and position of the European market are determining factors in willingness to cooperate on a financial level. the way in which the European 0 Similarly, market’s future is assessed, and consequent reliance on this market in years to come, to either a greater or a lesser extent, do not contribute to a special desire to cooperate in this field. 0 On the other hand, an unfavourable post-1975 growth record encourages financial cooperation. 0 Finally, certain advantages over the competition such as the argument that products are well suited to market-requirements, enjoy particular technological advantages, or are highly specialised - seem to preclude any desire for financial cooperation with other European firms. A segmented analysis following facts:
provides
confirmation
of the
Openly declaring advantages of productsuitability over competitors largely excludes any desire to cooperate financially. 0 If, in addition, there has been considerable post1975 growth of outlets, financial cooperation is quite out of the question. l
Above all, this segmentation enables us to identify the dynamic process of the refusal of financial cooperation. The firms rejecting such links are the dynamic ones, which have seen good post-1975 growth of outlets, and’which are highly competitive through good product suitability, careful specialisa-
lion, or strong relative advantages in the technological field. Such reserve on the part of West German firms can no doubt be explained by the fact that the West German financial system is well suited to the development requirements of the most commercially dynamic firms (high growth-rate of outlets), those whose indisputable qualifications in production are also likely to inspire confidence among bankers. In most market-economy counties, the best elements of the production system experience no difficulty in finding the financial resources they need. Only when massive resources are required is there a tendency to look towards financial cooperation. In short, while the factors contributing to a desire to engage in financial cooperation are not clearly defined, the conditions which preclude such a desire are quite obvious. Once again, cooperation is not perceived in positive terms, but rather as a means of compensating for certain weaknesses. For the moment, good individual performance on the industrial level, and the concept of financial cooperation on a European scale are not really related. In addition to the point raised in the previous paragraph, we must keep in mind the possible unwieldiness of such activities, and the logical distaste of firms for public or private bureaucracy in all its forms (an aversion which is justified by the fact that such red-tape involves higher operating costs). 3. Typical profile of candidatesfor cooperationin knowhow The contingency-table of the variables which differentiate the firms in favour of “know-how” cooperation from its opponents provides the following information: 0 the importance of the European market as an export outlet, and the degree of competition involved, are obvious determining factors in the desire to cooperate. 0 openly declaring advantages of product suitability on both the West German and European markets excludes any desire to cooperate in know-how. 0 the same applies to firms with a good post-1975 export record. In addition, carried out.
two other segmented analyses were
0 The variables “importance of the European market” and “degree of competition involved” would appear to be determining factors for a
wEs’r
tiERMAN
desire to cooperate in know-how. They concq in the following manner: keenly-felt competition on the European market coincides with a desire to cooperate in this field, whereas for firms which have not felt much competition in Europe, in spite of long-standing activity in this market (which is their first export market), there is virtually no desire to cooperate. l When it comes to the variables “advantages over competitors”, the segmentation is quite clear: a declared advantage of product suitability virtually excludes any desire to cooperate in know-how. In short, for the three forms of cooperation judged statistically possible, examination of the factors which are decisive for the firms declaring themselves for or against these forms of cooperation suggests two ideas: 1. European-scale cooperation seems above all to be a rescue-operation for firms in difficulty, and this very obvious for two categories. Firms having had export-market difficulties in recent years, and whose advantages over the competition have dwindled. In these cases, a clear desire to cooperate in Research and Development is expressed, and is certainly seen as a short-cut to reappropriation of the early stages of the industrial process (creation of new products). Firms with a poor market position, and subject to strong competition within Europe: in these cases, cooperation in know-how receives a special mention, and is certainly viewed as a desirable form of collaboration, allowing firms to withstand competition. 2. European-scale industrial cooperation is rejected explicitly by healthy firms especially, even in areas far removed from the market place itself (such as R and D, industrial application, finance, or know-how); there are two main reasons for this. An unwillingness to dilute existing advantages, knowing that the European market is still favourable to, and likely to be conquered by, such decisive advantages as product suitability. Reticence to change the balance of competition on the European market, knowing that where this market has been occupied over a long period, with competition remaining at a subjectively low level, there is no call to change the rules of the game and start cooperating.
FIRMS
Part II
AND
EUROPEAN
INDUSTRIAL
European Integration:
CO-OPERATION
211
Myth or Reality?
It is quite obvious that Europe is a platform for speeches: political speeches given periodically at spectacular summit meetings, private speeches often coloured with sentimentalism, or romantic humanism, or speeches made by businessmen fully aware of the spirit of conquest and the power of domination. But the content of these speeches is often far removed from the reality they discuss. The interviews conducted for this study have revealed that industrial firms have a certain number of reservations in respect of European integration (I), that the other partners in the socio-cultural context are hesitant (II), but that it is nevertheless possible to detect the early beginnings of what might become stronger alliances (III). Reservations Expressed by Firms with Regard to European Integration In the widest possible sense, European integration implies some form of common policy, and therefore a whole list of constraints; it also supposes a will to cooperate and to harmonise private initiatives, while respecting the demands of the complex set of interests and advantages of each partner. From this point of view, West German firms react somewhat hesitantly, in strategic terms, towards Europe. 1.
Europe, a superfluous organisation
First and foremost, Europe is seen as a market-place; a sales-outlet in which it is possible to assume a dominant position (for West German firms) through technology, through a recognised competence acquired from a long and brilliant industrial tradition steeped in the mastery of both the physical and chemical sciences, and through constant attention to market requirements. The very fact that a product is well-suited to the demand naturally means that the West German firm is not going to sabotage this advantage, and will therefore reject any form of cooperation which is organically close to the commercialisation of goods or services. This being the case, European scale industrial cooperation is refused with a certain amount of managerial pride. “Why cooperate, when we have proved our strength, our command of technology; our economic superiority, and our capacity to adapt adequately to change, with things as they are?” This is an opinion frequently expressed by West German market leaders.
212
SABINE
URBAN
and
SERGE
VENDERMINI
2.
Europe, an inoperative organisation
Industrial cooperation within Europe tends to be refused because it is judged inoperative. There is a growing feeling that industrial Europe is weakening. What seems most appropriate is cooperation with the most advanced companies worldwide. Mistrust of Europe seems to grow as a function of the internationalisation of companies beyond European frontiers. The countries of Europe are also characterised by relatively similar forms of social organisation, implying similar structures of costs and obligatory payments. The advantages of one area of the E.E.C. over another are therefore quite limited, and restrict the interest of cooperation on production or partial delocalisation of activity (through joint ventures, for example). The existence of significantly distinct technical norms, on the other hand, reinforces the temptation, or the necessity, to cooperate. Progressively harmonising European norms in the future will undoubtedly weaken this argument, which favours a more or less forced form of cooperation. As far as international sub-contracting is concerned, it is once again a question of an obligation, economic this time, rather than a positive desire to cooperate; this form of cooperation is most frequently organised in order to take advantage of excess production capacity, and only rarely in a quest for technical complementarity, which could be a more systematic feature. Some isolated experiments have, however, been carried out recently, to pioneer cooperation in developing new products or procedures, involving more especially French and West German small-tomedium firms. Hesitation
by Partners
in the Socio-Cultural
Context
Industrial firms are undeniably an essential component of West German economic life; they cannot, however, be dissociated from the other links in the social chain (public administration, private individuals, financial institutions. . .). From this point of view, West German society suffers from institutional and cultural restraints as far as European integration is concerned. 1.
Institutional
restraints
It is especially the field of Research and Development which is affected by institutional restraints. West German firms enjoy certain privileges, conferred on them by arrangements which are “regional” (i.e. “state”-organised at “Land” or province level). In most cases, grants are given to “regional” companies, in the hope that the economy
of the “Land” will later benefit from the research undertaken. Such dispersion of public moneys does not yet appear to be a part of the spending system of the political powers in other national territories (and a firtiori in European countries). Any European-scale coordination agreement would obviously require a profound change in mentalities which are still deeply steeped in national egocentricity. In addition, public and private funds made available in the Federal Republic of Germany have long been considerably higher than in France, in both absolute and relative terms. It is easy to understand why sharing accumulated advantages does not appeal spontaneously to “partners” who are often competitors on the same markets. Finally, it must be pointed out that in some sectors (especially textiles) R and D is undertaken with the support of professional organisa tions (Verbiinde), which once again take a national (as opposed to European) view of the problems involved. On the whole, the Public Authorities appear as the necessary defenders of national employment. They therefore tend to give preference to chauvinistic measures of short-term national interest, relegating to the background long-term industrial development strategy and the constraints of economic rationality. 2.
Reservations of cultural origin
These are diversely l
expressed:
The liberal doctrine of the Freiburg school, and neo-liberal economic theories have deeply influenced attitudes, and conditioned the reactions of management, both public and private, ever since the end of World War II. In this approach, a firm’s competitivenessis stimulated more by competition than by cooperation. The concept of “organised competition” is explicitly refused, even if there is clear evidence that such practices do indeed exist. Numerous heads of industry, the victims of a sort of ideological smokescreen in certain cases, operate with a de facto mistrust of industrial cooperation, which they see as a hamper to competition, an interference by technocrats, and a prejudicial control of company decisions and of decentralised initiztive. A European industrial policy is often seen as an element of confusion in the natural, efficient working of the market. Similarly, there is not, as yet, a very positive opinion of the potential efficiency of the European Community Institutions .
WEST
GERMAN
What industrialists expect from the E.E.C. authorities is not so much definite mea&res concerning specific points of European industrial policy (only 13 per cent of the firms answering expressed this opinion). Rather, they simply allude to the creation of “an overall climate favourable to initiative-taking” (87 per cent of the answers). 0 In a context of liberal culture, decentralised activity, and active regional life, bureaucratic French centralisation and state-interference give rise to clearly-expressed suspicion. Desire to cooperate with France is far from being openly declared. French protectionism, in its more or less surreptitious and unavowed forms, is seen as a dishonest and abusive practice, as though reciprocity did not exist in a game presented in these Manichean terms. The management staff interviewed delight in cultivating a highly-contrasted picture with, on the one hand, the merits of a clearly defined market economy, in which competitiveness actually stems from competition itself, and on the other hand, the rather hackneyed advantages of cooperation organised against a backcloth of Colbertism deeply entrenched in the French consciousness, and leading to pervasive bureaucratic centralisation. Beyond these reserved attitudes, some new ideas are nevertheless emerging, which could lead to efficient cooperation.
Part III
The Way to New Alliances
In an organisational framework that is somewhat confused, there is no lack of positive initiatives. Whatever reservations may be expressed towards the very principle of European-scale cooperation, whatever the hesitation, it is impossible to state that a desire to cooperate does not exist. There have been some perfectly successful industrial experiments, which provide valuable information; in other cases, embarking on a programme of cooperation involves complications arising from practical applications, and is not actually refuted on strategical or tactical grounds. The supervisory procedures implemented by the COCOM (Coordination Committee for Multilateral Export Controls) make West German firms quite aware of the interest of a certain degree of technological autonomy. The interviews conducted have revealed a certain number of conditions which are necessary in order to avoid the disappointment which would accom-
FIRMS
AND
EUROPEAN
pany unsuccessful attempts:
INDUSTRIAL
or
CO-OPERATION
ill-managed
213
cooperation
1. Cooperation activities require clear definition of the objectives of the undertaking. Each partner’s motivations must be totally explicit. The advantage of fixing the objectives in this manner is that heads of firms are thus forced to think seriously about what is materially possible and desirable, and at the same time to specify the way in which these objectives may be appreciated a pos teriori.
2. Once the objectives have been determined in this way, the next phase concerns the methodical organisation of cooperation activities. In each of the various firms involved, agreement must be reached on the following points in particular. Accurate analysis of the problems to be dealt with, and of the technical, commercial, and financial parameters involved; l Coordinated time-planning of cooperation activities; l Designation of the persons responsible in each of the organisations taking part (and capable of using a common language); l Follow-up of cooperation activities. l
In the case of long and complex operations, a “task force” is probably not sufficient for completing the activity undertaken, and in such cases must be seconded by a specifically created “management committee”. 3. Cooperation supposes mutual confidence between the partners, and fair sharing of profits. Confidence is not something that can be enforced by order; it evolves out of practice. Consequently, cooperation activities undertaken as part of a set of operations appear more promising than “oneoff” collaborations. 4. The cooperation
must take place at the appropriate firms or industrial groups), or with interested partners (relations between firms or branches).
hierarchical level (within
5. It may be an advantage to approach cooperation in a gradual manner, step-&y-step, or even to imagine intermediary forms which create less reticence than direct inter-company or intergroup cooperation: l l
Indirect Indirect
cooperation, cooperation
through suppliers; implemented by research
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institutions or common professional organisations; l Indirect cooperation can also be established via professional associations (Verbande), whose task is to harmonise technical norms and fiscal laws at European level. At all events, large firms, or important mediumsized firms, are better equipped in terms of manpower and general organisation than small firms when it comes to undertaking and managing these various forms of cooperation, which will only be effective if all participants feel that they are really involved in some useful way. 6. Industrial cooperation has a greater chance of being accepted if there exists a broad-minded cultural attitude; mutual distrust tends to diminish as the partners involved get to know each other better. School or university training programmes, travel, cultural exchanges, information pro-
grammes, and the image given by the press and the media all have an essential role to play in this process. References 1. M. Richonnier: Les Me’tamorphosesde I’Europe de 2769 li 2001, Flammarion, Paris, 1985. 2. See J. Vigneron, “Sept ans pour construire le vrai Marche commun,” Economic prospective lnternationale, Review of the CEPIZ, 1st quarter 1986, p. 11. 3. A detailed account has been published in No. 2 (March 1986) of Etudes et Recherchesdu Conzmissariat G&Pm1 du Plan: Enteprises Allemandes et Coopt+ation Industrielle li 1’6chelle europt?enne. La Documentation francaise, Paris. 4. See Sachverstbndigenrat; ZUY Begutachtung der gesamtzoirtschaftlichen Entwicklung: \ahresgutachten 2985/86. W. Kohlhammer, Stuttgart and Mainz, 1986.