International direct investment, in contrast to portfolio investment, involves foreign control over subsidiaries operating in the receiving country. While this type of international capital movement has a long history, there are significant changes in the post-war years compared to earlier periods. Increasingly the foreign owned subsidiary is becoming part of an internationally integrated production and distribution complex. The volume of direct investment is growing at roughly twice the rate of international trade, much of this growth being due to investment originating in the United States. The investment is especially important in science based industries. Many observers see these changes taken together as having important implications for industrial relations in host countries, including the United Kingdom, which, after Canada, is the second largest destination for United States direct investment. But what are these implications, and indeed, what has happened up to now? The known facts are few and the sources of information widely scattered. The purpose of this paper is to draw this information together, treating the United Kingdom as a case study.
It is often suggested that the foreign owned subsidiary is more productive and profitable than its domestic counterpart, and that this superior performance is at least partly due to better labor utilization. This implies that the foreign firms behave differently in the labor market, have different personnel policies, and may tend towards a different mode of industrial relations. [ABSTRACT FROM AUTHOR]