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Survey of Foreign Affiliates in New York City. Overview of our talk. The survey and the characteristics of the affiliates in the sample Why do foreign affiliates come to NYC and what do they do here? The relationships of NYC foreign affiliates with the local economy

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overview of our talk
Overview of our talk
  • The survey and the characteristics of the affiliates in the sample
  • Why do foreign affiliates come to NYC and what do they do here?
  • The relationships of NYC foreign affiliates with the local economy
  • The relationships of NYC foreign affiliates with their HQs
  • NYC foreign affiliates: Then (1995) and now
  • Take away.
what did we set out to do we sought understanding of
What did we set out to do?We sought understanding of:
  • Why do foreign companies operate in NYC?
    • Decision making process; selection criteria
    • Alternatives considered
    • What does it take to keep them?
  • What advantages do presence in NYC provide?
    • The strategic value of investment in NYC
  • How to maximize the benefits of investment in NYC for the firms and the local economy?
    • What do foreign firms do in NYC (value adding activities)?
    • How locally embedded are they?
the survey
The Survey
  • We approached all foreign affiliates in New York City (listed in The Weissman Center Directory of International Business)
  • Mailed questionnaire, 2004
  • Responses received from a sample of 142 affiliates
    • About 10% response rate.
how does this growth compare with the economy growth rates 3 years
How does this growth compare with the economy?Growth rates, 3 years
  • The US economy: 3.5%
  • NY state: 2.5% (2001-2003)

Source: Bureau of Economic Analysis

mode of establishment
Mode of establishment
  • 91.5% of the affiliates in our sample established an office from scratch
  • Acquisitions: 8.5%
    • Of US-owned firm: 7.0%
    • Of foreign-owned firm: 1.5%
our sample is wholly owned level of ownership
Our sample is wholly-owned Level of ownership
  • The overwhelming majority of foreign affiliates in our sample are wholly-owned: 86.5%
  • The rest is split equally between majority owned (more than 50%) and minority owned (up to 49%).
and those that would leave nyc where will they go
And those that would leave NYC, where will they go?
  • The most frequently selected alternative is the tri-state region
  • Other attractive destinations are Chicago, Los Angeles, and Washington DC.
slide22
What do NYC affiliates expect policy makers to do to make NYC a better business location?% of the sample
nyc affiliates do not sell much locally
NYC affiliates do not sell much locally
  • About 40% of the affiliates in our sample generate less than 10% of their sales locally
  • Another 17% of them sell less than a quarter of their total locally
  • Only 7% generate more than three quarters of their sales locally
nor do they purchase much locally
Nor do they purchase much locally
  • About half of the respondents do less than 10% of their purchases locally
  • Another 15% purchase less than a quarter locally
  • Only 20% of the affiliates in our sample do more than three-quarters of their purchases locally
and the competitive arena of most of them is away from nyc
And the competitive arena of most of them is away from NYC
  • Three quarters of the respondents reported that most of their competitors are located outside NYC:
    • 35% of the respondents said less than 10% of their competitors are locally-based
    • Only 13% of the respondents reported most of their competition is locally-based
slide33
But they seem to be heavily engaged with local companiesFrequency of meetings with people from other companies, % of the sample
slide34
Why do they meet other companies so often?% reported these meetings are “very important” and “important” source of:
slide37
Resources transferred between NYC affiliates and their parent companies % reported intense and moderate transfers
slide42

NYC foreign affiliates

Then (1995) and Now

the 1995 survey sample and response rate
The 1995 survey:Sample and response rate
  • 1992 Directory of Foreign Firms in the United States
    • 559 firms in NYC
    • Random sample of 200
    • 39 interviews
  • D&B Information Services
    • 550 foreign firms in NYC
    • 37 mail survey responses
  • Surveys combined
choose nyc again
Now

Yes - 90%

No - 10%

Then

Yes - 82%

No - 18%

Choose NYC again?
leave nyc
Now

If yes, most frequently mentioned locations are tri-state area, Chicago, Washington DC and Los Angeles

Then

If yes, most frequently mentioned locations are tri-state area, elsewhere in New York State, Colorado, and Arizona.

57% would leave for tax savings

Leave NYC?
slide46
What do NYC affiliates expect policy makers to do to make NYC a better business location? % of the samples
take away the overall picture emerging from our data
Take away: The overall picture emerging from our data
  • NYC affiliates are a population of small establishments, quite heavily controlled by their parent companies
  • NYC affiliates are a force for good for the NYC economy and enhance its economic strength
    • Create high value added jobs
    • Bring and maintain capital
  • The most important resource transferred between NYC affiliates and their parent companies is knowledge of various kinds.
    • Except for capital and employment the transfer is two ways.
take away for nyc policy makers
Take away for NYC policy makers
  • The satisfaction of foreign affiliates with NYC is very high and has increased over the last decade
    • Most would choose NYC again
  • However, high taxes are a growing concern of NYC affiliates
    • #1 on the list of expectations for improvements by policy makers!
take away for nyc affiliates
Take away for NYC affiliates
  • Most sales and purchases of NYC affiliates takes place elsewhere.
  • Most affiliate competitors are not located in NYC
  • Local interaction with other companies is of critical importance to foreign affiliates.
    • Knowledge and local learning appear to be the major strategic value that NYC provide foreign affiliates.
finale
Finale

Copies of this presentation and the questionnaire can be downloaded from:

http://zicklin.baruch.cuny.edu/centers/weissman