C
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ENTRE FOR NTERNATIONAL
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USINESS
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TUDIES
Several Characteristics of Service Multinational Corporations
Hiromu Inoue1
Paper Number 1-10
Research Working Papers
1
Professor at Hannan University, Faculty of Business, Osaka, Japan. Visiting Professor at London South
Bank University, Centre for International Business Studies, April 2009 – March 2010. Email:
hinoue@hannan-u.ac.jp
1
Abstract
This paper aims to explain the central importance of characteristics specific to service
trade and service MNCs. It is composed of three main issues; the first is the theoretical
relationships between international trade and local sales of services by service MNCs. It
is impossible to apply traditional trade theory to local sales of services by service MNCs,
which are classified in mode 3 of service trade by GATS. In this case, the probability of
exporting the service depends not on the comparative advantage but on the competitive
advantage of the service producing company. The second is the actual conditions of
services FDI. The growth of services FDI is caused by the global deregulation and
liberalization in service markets and by the tradability revolution through the
development of information technology. The third is the general characteristics of service
MNCs compared with that of manufacturing MNCs. The competitive advantages of
service MNCs are different from those of manufacturing MNCs. In addition, non-equity
forms of penetration are important in a number of service industries. Furthermore, the
share of local sales in total sales by foreign affiliates of most service MNCs is remarkably
high. However, they are classified into three types of industries from the detailed analysis
of sales of services by foreign affiliates of U.S. MNCs.
Key words: Service MNCs; service trade; services FDI; GATS; comparative advantage;
competitive advantage; new forms of international investment; intra-firm trade.
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Several Characteristics of Service Multinational Corporations
Hiromu Inoue
1.
Introduction
International trade in services exhibits different characteristics from trade in goods.
Services are distinguished from goods with regard to the following four generic
differences: intangibility, variability, perishability of output, and simultaneity of
production and consumption. As services lack the mobility of material goods, for the
product to reach the consumer we must have one of the following conditions: either the
supplier moves to the location of the consumer or the consumer moves.
Service multinational corporations (MNCs) supply these services abroad and
foreign sales of services by service MNCs have been increasing in recent years. For
example, in the United States, which is one of the most advanced both as a service
economy and in terms of the activities of service MNCs, the foreign sales of services
through foreign affiliates of U.S. MNCs had been higher than the amount of U.S. exports
of services after 1996. In 2006 it accounted for $806 billion in contrast to $415 billion of
exports. On the other hand, the sales of services through the affiliates of foreign
multinational corporations in the United States accounted for $616 billion, it fairly
exceeded the amount of U.S. imports of services, which were $314 billion in 2006
(Koncz & Flatness, 2008).
Thus a specific analysis of service MNCs is essential in order to understand the
actual conditions of international service trade.
This paper first explains the theoretical relationships between international service
trade and local sales of services by service MNCs (section 2). It then analyses the actual
conditions of foreign direct investment in services (section 3). This is followed by an
explanation of the general characteristics of service MNCs compared with that of
manufacturing MNCs (section 4). The last section summarises and concludes. The
Appendix contains all charts and tables.
3
2. Service Trade and International Trade Theory
2-1 The Growth of Service Trade
The share of trade in services to outputs in services is much smaller than the share of
trade in goods to outputs in goods, because many services are un-tradable. This is due to
the nature of services itself. Many services cannot be stored, and they are produced and
consumed in the same place at the same time. It has also been argued that measurement
of trade in services is more difficult than measurement of trade in goods. However, it
doesn’t mean that these characteristics of services make impossible to provide the
services in foreign markets. The share of service trade in total international trade has been
increased gradually.
According to the trade statistics of United Nations Conference on Trade and
Development (UNCTAD), the world share of service exports to exports of goods had
been growing from 23.9% in 1990 to 24.1% in 2007 (UNCTAD, 2009a). This is a much
smaller than the share of service sectors in GDP of developed countries, which accounted
for over 70%. However, the growing trend of service trade is attributed to the
acceleration of the service economy in developed countries and to the tradability
revolution of services. These two trends are caused by global deregulation and the
development of information technology.
According to the statistics of UNCTAD again, the world exports of goods rose
by 4.0 times, from $3.5 trillion in 1990 to $13.8 trillion in 2007. In this period, the
exports of goods from developed countries rose 3.2 times, from $2.5 trillion to $8.1
trillion. On the other hand, the exports of goods from developing countries rose 6.2 times,
from $0.8 trillion to $5.2 trillion. The share of exports of goods from developing
countries in world exports of goods accounted for 37.5% in 2007, as the role of
developing countries in manufacturing had been growing.
At the same time, world exports of services rose by 4.0 times, from $0.8 trillion in
1990 to $3.3 trillion in 2007. Exports of services from developed countries rose by 3.6
times, from $0.6 trillion to $2.4 trillion, and the growth rate of exports of services
4
exceeded that of goods. In this period, exports of services from developing countries rose
5.6 times, from $154 billion to $849 billion, and the growth rate exceeded that of the
world as a whole and that of developed countries. However, the share of exports of
services from developing countries was limited to 25.4% even in 2007, as developed
countries still have a big advantage in the exports of services.
Service trade is composed of four categories in the international balance of
payments statistics of International Monetary Fund (IMF), which are transport, travel,
other private services, and official services. According to the service trade data of World
Trade Organization (WTO), exports of transport rose 3.9 times, from $223 billion to $873
billion; exports of travel rose 3.6 times, from $265 billion to $947 billion between 1990
and 2008 respectively. Exports of other private services rose 6.5 times, from $295 billion
to $1,911 billion, the share of which in total private services had been estimated to be
51.2% (WTO, 2009).
Therefore, the core category of service trade is indicated in other private services.
This category is divided in communications, construction, insurance, financial services,
computer and information services, royalties and licence fees, other business services and
personal cultural and recreational services. As I mention in section 2, these subcategories
correspond to the sectors of growing foreign direct investment.
2-2 Four modes of supplying services
As Chart 1 shows, the WTO General Agreement on Trade in Services (GATS) identifies
four modes of supplying services to non-residents. Mode 1 is cross border supply of
services. In this mode the service is delivered within the territory of the Member country,
from the territory of another Member. They are, for example, the services through
telecommunications, such as international telephone call, or the services embodied in
goods, such as export of software.
Mode 2 is consumption abroad: the service is
delivered outside the territory of the Member, in the territory of another Member, to a
service customer of the Member. The typical example of this mode is tourism. Mode 3
relates to a commercial presence. The service is delivered within the territory of the
Member, through the commercial presence of the supplier, such as financial service,
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wholesale, retail sales and transport service through the foreign affiliates established by
direct investment. Mode 4 is via the presence of a natural person. The service is delivered
within the territory of the Member, with the supplier present as a natural person, such as a
consultant on foreign business or on legal services. In mode 1 and 2, the service supplier
is not present within the territory of the Member while in mode 3 and 4, the service
supplier is present.
International transactions between residents and non-residents are accounted as
international service trade in the balance of payment statistics in the IMF Balance of
Payments (BOP) Manual, even if either supplier or consumer or both move to another
country. In this case, mode 1, 2 and 4 are applicable to the international trade in the IMF
BOP Manual. However, service delivered within the territory of the Member by a foreign
affiliate of a MNC is considered a transaction between same residents, and therefore the
international transaction in mode 3 is not defined as international trade in the IMF BOP
Manual. This means that the definition of international service trade is different between
WTO and IMF. The growth of the services delivered by foreign affiliates of a
multinational corporation is registered as growth of service trade according to the
definition of WTO. However, it is not considered growth of service trade on the IMF
definition. This difference in definition allows the WTO to include the liberalization of
foreign direct investment in the negotiations as part of the WTO policy of service trade
liberalization2.
2.3 International Trade Theory for Service Trade
There have been discussions about whether we currently have the availability of an
international trade theory specific for service trade; one that takes account of the specific
2
The Manual on Statistics of International Trade Services was published jointly by six organizations such
as United Nations, European Commission, IMF, OECD, UNCTAD and WTO in 2002. The aim of the
manual is to provide a coherent conceptual framework within which countries can structure the statistics
they collect and disseminate on international services trade. It recommends extending the fifth edition of
IMF`s Balance of Payments Manual (BPM5) classification of transactions by type of service to provide
more detail through the Extended Balance of Payments Services Classification (EBOPS). The manual also
recommends foreign affiliate trade in services (FATS) statistics, which are supplied by enterprises
internationally through the activities of foreign affiliates abroad (United Nations, European Commission,
IMF, OECD, UNCTAD, WTO, 2002).
6
characteristics of service trade mentioned above. The basis of international trade theory is
comparative advantage, originally attributed to the difference in productivity levels
(Ricardo model), the abundance of product factor (Heckscher-Ohlin model), or the
economies of scale (intra-industry trade). The comparative advantage scheme could be
applied to mode 1 of service trade, because neither supplier nor consumer moves across
the border. In mode 2, although consumer moves a service supplying country, the service
is exported from the country which has a comparative advantage. Therefore it can also be
explained by orthodox trade theory.
However, the situation is very different from the above when the supplier moves
to a service consuming country (modes 3 and 4). Especially in mode 3, the service is
supplied by the foreign affiliate in a consumer country, which is established by a MNC in
the country exporting the service. In this case, it is doubtful whether the comparative
advantage of the service exporting country could be applied to the service trade. On this
issue Deardorff (1985: 11) argues as follows:
Thus a firm that wishes to export a service may do so by setting up a branch in
a foreign country, hiring local labour, and financing any necessary local
capital expenditures within the local market of the foreign country as well. If
it does all of this, one may then wonder what it is that is actually being
exported. The answer in general is that there is some other factor that
contributes to the profitability of the firm. This may be a unique method of
management, a proprietary product or brand name, or a technique of
production to which only it has access.
Deardorff defines these absent factors as management. He describes the standard
Heckscher-Ohlin (H-O) trade model between goods and service. In this model, the two
factors, labour and management are required in the production of goods and services.
Comparing two countries, A and B, he assumes that the autarky relative price of the
service is lower in Country A than in Country B; this could either mean that service
production is management-intensive and Country A has a relative abundance of
management, or that the service is labour-intensive and Country A is well endowed with
7
labour. Alternatively, the price difference could result from differences in technology.
Then he analyses two different cases: one related to differences in relative factor
intensities and the other case related to unequal technologies. The result is the following.
Case I: Services are management intensive
In this case, for Country A to have the assumed comparative advantage in services, it
must also have a relative abundance of management. Thus in autarky, the salary of
managers and therefore, the relative price of services in A would be less than those in B,
and service producers in A have an incentive to export services. They will set up
operations in B and provide services using local labour, while continuing to use managers
located within A.
Clearly, Country A exports services and imports goods, because A has a
comparative advantage in services.
Case II: Services are labour intensive
If services are labour intensive, Country A’s assumed low relative price must be the result
of an abundance of labour. Service producers in A will not penetrate B’s market, since
they have to employ B’s more expensive labour as well as their own expensive managers
to produce in B. Instead, B’s producers will have an incentive to use their managers
together with A’s labour to produce services in A. In this case, it appears that service
trade violates the principle of comparative advantage. Labour-scarce Country B exports
labour-intensive services, although these services cost more in B than in Country A under
autarky.
However, what is being traded is the productive contribution of the factor,
management. Since in both case I and II, services are exported by the country in which
management has the lower relative autarky salary, trade follows comparative advantage.
It follows that each country tends to export, in factor content terms, its abundant factors.
Case III: Differences in technology
Suppose that factor endowments are the same in the two countries, and that autarky prices
differ instead because Country A has a different technology for producing services than
8
does Country B. If the two countries were to face the same price, A would clearly
produce more services and fewer goods than B. If demand schedules are identical, it
follows that the autarky price of services in A must be lower than in B. Factor prices
depend both on the degree of substitution between goods and services in demand and on
the relative factor intensities of the two industries. The salary of management in A,
measured in units of output, may be higher than in B.
In this case, when trade is permitted, A will clearly export services. Then the
comparative advantage seems to be working well. On the other hand, the autarky price of
management is higher in A than in B, but with trade Country A nonetheless appears to
export the services of management. This model involves trade in management, not in
services, and this trade is in accordance with comparative advantage; it fails to work once
differences in technology are introduced.
In all cases, Deardorff insists on the availability of comparative advantages in
service trade. This is generally accepted. In his opinion, the comparative advantage of
service supplied in the consumer country depends on the management owned by a parent
company of MNC, which does not supply the service directly. However, it is exactly the
same as ownership advantage which is the origin of competitive advantage of MNCs;
similarly with licensing, management contract or franchising contract in international
alliances between independent companies. As a result, the MNC receives license fees or
loyalties from foreign affiliates or alliance companies which supply services.
In this case, management means the service exported by a parent of the MNC as
intra-firm trade or export of technology as international contracts. As Chart 2 shows, this
transaction is the service trade of mode 1 in the WTO classification. It is therefore, still
the case that the service trade is caused by comparative advantages.
However, the advantage of the service produced directly by a foreign affiliate or
an alliance company, which is the service trade of mode 3, reflects the competition
among service producing companies in a consumer country. Therefore, the probability of
exporting the service depends not on the comparative advantage of management but on
the competitive advantage of the service producing company. It means that it might be
impossible to apply traditional international trade theory to the service trade of mode 3. I
9
will mention the competitive advantages of service MNCs and their causes in the
following sections.
3. The Growth of Services FDI and its Causes
3-1 The Growth of Services FDI
As shown in Section 1, world service trade have been growing since the 1990’s, it rose by
4.0 times from 1990 to 2007. On the other hand, as Table 1 shows, world’s inward
foreign direct investment (FDI) stock in service industries rose by 10.6 times, from $948
billion in 1990 to $10 trillion in 2007. World’s inward FDI stock in manufacturing rose
by 5.3 times in the same period, so the growth of services FDI is outstanding. The share
of services FDI in the world’s total inward FDI stock was 63.8% in 2007, rising from
48.8% in 1990.
Developed countries’ inward stock of FDI rose by 5.7 times in primary industries,
5.1 times in manufacturing, and 9.4 times in services between 1990 and 2007, while
developing countries’ inward stock of FDI rose by 7.9 times in primary industries, 5.8
times in manufacturing, and 15.3 times in services in the same period. Although the
geographic distribution of services FDI has been mainly towards developed countries, the
share of developing countries in inward services FDI stock soared to 25.8% in 2007 from
17.9% in 1990.
The breakdown of FDI in services by sector is the following. The share of trade
and finance in total inward stock of services FDI was 24.1% and 40.5% respectively in
1990; services FDI was indeed concentrated in these sectors until 1990. These sectors
accounted for 16.6% and 30.4% 2007. However, the share of these sectors dropped
considerably during this period. In contrast, the higher growth rates of FDI were in
electricity, gas and water, transport, storage and communication, and business activities
until 1990’s. The growth rates of inward stock of FDI in these sectors rose by 34.0 times,
31.1 times and 21.0 times between 1990 and 2007 respectively. The share of these sectors
in total inward stock of services FDI in 2007 was 3.4%, 9.2% and 29.1% respectively.
10
Let us now consider the features of inward FDI in developing countries
compared to those in developed countries. As mentioned above, the share of developing
countries in world’s inward stock of services FDI increased 25.8% in 2007 compared to
17.9% in 1990. In particular, the growth rates of developing countries’ inward stock of
FDI in business activities rose by 80.4 times from $16.7 billion to $1.3 trillion, and the
share of developing countries’ stock of business activities in world’s stock increased
45.8% in 2007 against 12.0% in 1990 3 .
This pattern might reflect the growth of
offshoring of IT related services to developing countries.
The share of the developing countries’ inward stock of FDI in trade also increased
from 11.3% to 15.8%, rising by 10.1 times from $25.8 billion in 1990 to $262.1 billion in
2007.
Although the developing countries’ inward stock of FDI in electricity, gas and
water rose by 23.3 times between 1990 and 2007, the share of developing countries in
world total decreased slightly from 30.0% to 20.6% in this period. This is the results of
growth in the inward stock of FDI in developed countries by 38.3 times in these sectors.
This pattern may be the effect of deregulation and liberalisation of the utility services that
have been spreading worldwide not only in developed countries but also in developing
countries.
In contrast, the developing countries’ inward stock of FDI in transport, storage
and communications rose by 18.5 times, but the share of developing countries in world
total decreased remarkably from 44.9% to 26.8% between 1990 and 2007. The developed
countries’ inward stock of FDI rose by 40.6 times in this period. It might be a reflection
of the deregulation and global reorganization of communication industry in developed
countries in 1990’s. The developing countries’ inward stock of FDI in this sector also
rose in this period, so it is expected that the wave of industrial reorganization in the
communication sector will spread to developing countries.
The surge of FDI in services described above may be explained by two factors as
follows. First, deregulation and liberalization have been proceeding in many services
industries which have until recently been closed to foreign entry. For example, the utility
3
The inward FDI stock in business activities in Hong Kong (China) accounted for 88% of developing
countries in 2007. See (UNCTAD, 2009b) Annex table A. I. 4. foot note.
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industries such as electricity, gas and water and communication have been mainly
operated by public enterprises in many countries until 1980s. Once the liberalization of
FDI policies began around the mid-1980s, and gathered momentum during the 1990s, the
private sector becomes involved leading to a surge in services FDI.
Second, new information and communication technologies are dramatically
changing the tradability of the information-centred set of services, many of which had
been non-tradable. It is the tradability revolution. For example, in business activities,
many firms are concentrating on the core competences of their business only, so services
traditionally obtained in-house by firms are now being externalized and consultation
between service providers and customers are starting to take place at a distance. In
particular offshoring of IT services has gained momentum in recent years. The offshoring
of export-oriented services such as call centres, business processes, drawing, testing and
even research and development (R&D) is operated by local firms or foreign affiliates of
MNCs in abroad.
3-2 Characteristics of the Players of Services FDI
As Table 2 shows, the pattern of distribution of outward FDI indicates that MNCs from
developed countries held almost the entire outward stock of services FDI until 1990s. In
1990, the share of the developed countries’ outward stock of FDI in services was almost
99% as well as manufacturing.
Although, developed countries had a large share of outward stock of FDI in
manufacturing, which was 96.1% even in 2007, the share of developing countries’
outward stock of FDI in manufacturing only grew from 0.9% to 3.9% between 1990 and
2007. On the contrary, the share of developing countries’ outward stock of FDI in
services grew faster than manufacturing from 1.2% to 15.3% in the same period. The
share of developing countries FDI in services was highest in business activities, which
accounted for 28.6% in the world total in 20074, followed by construction (14.7%) and
4
The outward FDI stock in business activities in Hong Kong (China) accounted for 94% of developing
countries in 2007. See (UNCTAD, 2009b) Annex table A. I. 5. foot note.
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trade (13.7%). It implies that the activities of MNCs based in developing countries had
been more aggressive in service industries than in manufacturing.
We shall now analyse the relationship between the industries in which inward FDI
takes place and the industries to which the MNCs responsible for that FDI belong. Table
3 indicates the assets of majority owned foreign affiliates (MOFA) of U.S. MNCs in 2004.
The assets of affiliates classified by the industry to which the affiliate belongs are made
up of every industry in which the affiliates operate while the assets of affiliates by
industry of U.S. parents are made up of every industry in which the parent companies of
their foreign affiliates operate their main business. The differences between these figures
give us a picture of how different the industries in which foreign affiliates operate are
from the industries of their parent companies.
In manufacturing, the assets of affiliates by industry of affiliate accounted for $1.4
trillion, and it was less than one third of the assets of affiliates by industry of U.S. parent,
which accounted for $5 trillion in 2004. It implies that more than two thirds of the assets
of affiliates of manufacturing MNCs were invested in industries other than manufacturing.
On the other hand, in management of non-bank companies and enterprises, the
assets of affiliates by industry of affiliate exceeded the assets of affiliates by industry of
U.S. parent by $2.2 trillion. In finance and insurance, the former exceeded the latter by
$944 billion, and in wholesale trade, the former exceeded the latter by $361 billion as
well. In most sections of service industries, the former exceeded the latter with some
exceptions such as in professional, scientific, and technical services and retail trade.
The assets of affiliates operating in service industries, which excluded mining,
manufacturing and primary industries from all industries, accounted for $6.9 trillion,
while the assets of affiliates of U.S. parents operating in service industries accounted for
$3.6 trillion. The difference, which accounted for $3.3 trillion, indicates that 48% of all
assets of affiliates operating in service industries were invested by non service MNCs,
especially manufacturing MNCs. Manufacturing MNCs are making their own
international network system by investing not only in manufacturing but also in service
industries such as international trade, finance and business services. The increase of
direct investment in service industries by manufacturing MNCs also means that these
MNCs tend to shift abroad their non-manufacturing activities.
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4. The Characteristics of Service MNCs
4-1.
Service MNCs and the Eclectic Paradigm
It is important issue to analyse the specific characteristics of service MNCs and how they
differ from manufacturing MNCs. However, there are many business sectors classified in
service industries; moreover, the activities of MNCs which operate these businesses are
different from each other. Therefore, excessive generalisation of the activities of service
MNCs may obscure the variety of the actual conditions of service MNCs, and it may
mislead the arguments about the issue.
In this section, allowing for what has just been remarked I will try to describe the
characteristics of service MNCs in three features as follows. The first feature is that the
competitive advantage of service MNCs is different from that of manufacturing MNCs.
Because it is difficult to evaluate the quality and contents of services provided by service
MNCs before they are purchased. Second, non-equity forms of MNC participation are
important in a number of service industries. Third, local sales constitute a large share of
total service sales of foreign affiliates, because of perishability of output and simultaneity
of production and consumption.
I will now consider the first feature of the activities of service MNCs. Patterns
of globalization of service companies are very different whether they provide tradable
output or non-tradable output. Local sales of foreign affiliates of service MNCs, which is
classified in the mode 3 of service trade by GATS, aren’t calculated as a service trade in
the international balance of payment statistics, but as local service transaction. Therefore,
the motivation of FDI and the advantage of service MNCs providing these services are
different from those of manufacturing MNCs providing tradable outputs. On the other
hand, the motivation of FDI and the advantage of service MNCs providing tradable
services may be similar to that of manufacturing MNCs. Then in this section, I will
describe the characteristics of service MNCs providing non-tradable services.
There have been many studies about competitive advantages of MNCs, however
it is very difficult to explain the activities of MNCs from a comprehensive theory.
14
Dunning (1993a) explains the origin of competitive advantages of MNCs by the
combination of ownership advantages, location advantages and internalization advantages.
His theory has been labelled the eclectic paradigm of international production. On this
hypothesis, a firm will engage in foreign value-adding activities if three conditions are
satisfied as follows:
(1) It possesses net ownership advantages vis-à-vis firms of other nationalities in serving
particular markets.
(2) Assuming condition (1) is satisfied, it must be more beneficial to the enterprise
possessing these advantages to use them (or their output) itself rather than to sell or
lease them to foreign firms. These advantages are called internalization advantages.
(3) Assuming conditions (1) and (2) are satisfied, it must be in the global interests of the
enterprise to utilize these advantages in conjunction with at least some factor inputs
outside its home country. These advantages are termed the location advantages of
countries.
The eclectic paradigm was mainly developed to explain the activities of
manufacturing MNCs. However, an adequate analytical framework has been required for
explaining all kinds of multinational service activities as services FDI have been growing.
Dunning (1993b) reinforces the eclectic paradigm by applying it to all kinds of
international production, whether the outputs are tangible or not.
Even if the competitive advantages are attributed to the ownership advantages of
the corporation, the contents of the advantages are different between manufacturing and
services. It is apparent that the competitive advantages of manufacturing corporations are
attributed to the productivity and high quality of the outputs derived from their own high
technologies and knowledge, know-how, the ability of R&D, the scale of the corporation
and so on. However, many outputs of service industries are so labour intensive that it is
difficult for utilise the economies of large scale production. In the supply of many
services at least professional business services – such as legal counselling, valuation,
executive search, or management consulting, all clients face a major problem of
uncertainty as to the quality of the service supplied. Because of the uncertainty, clients
resort to some surrogates to assess the quality, such as relying on reputation. Therefore,
15
excellent global reputation is required to achieve a global competitive advantage
(Aharoni, 2000).
One of the most important signs of an excellent global reputation is the
development of international brands which sell an image that is an assurance of a
standardised quality service that is guaranteed all over the world. However, service
brands are not associated with physical products that are easily comparable. Therefore,
trust must be developed by the client and this often necessitates physical proximity and,
especially in advanced services, the ability to manage a flow of external information and
knowledge by the client organisation (Rubalcaba-Bermejo & Cuadrado-Roura, 2002).
There may be conflicting demands here. In fact, service brands are required to be
standardised while the services provided are required to be individualized to the
requirements of specific clients. Therefore, the quality of services plays an important role
among non-price competition factors.
The main differences of location advantages between manufacturing and service
MNCs are the following. ‘Location theory assumes that corporations locate their
production where immobile inputs are cheapest and average production costs can
consequently be minimized’ (Buckley, Pass, & Prescott, 1999: 159). This theory is
adequate to the location choice for manufacturing and tradable services as well. However,
for non-tradable services, ‘where interaction between supplier and customer is essential,
location depends on the catchment area of customers’ (Buckley, Pass, & Prescott, 1999:
159). Therefore, the location of service activities tends towards countries and regions
which have big consumer markets and where the income of consumers is relatively high.
Internalization is undertaken up to the margin where the benefits are equal to the
cost (Buckley & Casson, 1976). The two most important areas of internalization are
markets for intermediate products and markets for knowledge (Ietto-Gillies, 2005). The
former makes vertically integrated manufacturing MNC. However, non-tradable services
corporations don’t have any incentives to integrate intermediate products market.
Therefore, internalization of international service activities depends on whether
internalization of market for knowledge has advantages over externalization such as
licensing in order to protect the quality of services supplied by the corporation.
16
4-2
Service MNCs and New Forms of International Investment
The second feature of Service MNCs is that non-equity forms of MNC investment are
important in a number of service industries. At least in information-intensive sectors,
where information is tacit and costly to produce, but where it can be replicated easily,
‘there are advantages of internalizing such competitive assets and protecting leakage of
firm-specific knowledge derived from these assets’ just as it happens in manufacturing
industries (Buckley, Pass, & Prescott, 1999: 157). However, in many other service
industries, non-equity forms of MNC participation, so-called new forms of international
investment, are important unlike in the case of the manufacturing industries. New forms
of international investment include joint ventures, licensing agreements, franchising,
turnkey and “product-in-hand” contracts, production sharing and risk-service contracts,
and international subcontracting (Oman, 1984). They are important and sometimes
dominant in hotels, fast-food outlets, restaurants, car rental, retailing, construction and
various professional services. In hotels, the forms of such non-equity arrangements as
management contracts and franchising agreements are dominant in fully- or partiallyowned affiliates. Partnerships are used in business consultancy, engineering and legal
services. Franchising is common in retail trade and car rentals. Management contracts are
used in infrastructure services in some countries (UNCTAD, 2004).
There are a number of reasons why non-equity forms are more important in the
involvement of service MNCs than in manufacturing MNCs. The competitive advantages
of service corporations consist of knowledge-based, intangible assets, rather than tangible
ones that are more important in manufacturing corporations. Intangible assets, such as
organizational and managerial expertise, can be separated from tangible and capitalintensive assets. Where the critical knowledge of service MNCs is frequently codified for
ease of transfer to local firms, intangible assets can be equally well protected and
enhanced in non-equity-based arrangements as in equity-based operations (UNCTAD,
2004).
In other service industries, host government policies - such as restrictions of FDI and industry characteristics - such as partnerships in accounting and legal services - are
decisive in the mode of MNC participation (UNCTAD, 2004).
17
It is very difficult to grasp the actual conditions of non-equity forms of MNC
participation, because of the limited availability of information on these activities.
However, royalties and licence fees are paid by local firms for use of the assets and
expertise obtained under contractual agreements of various types which include nonequity forms. The data suggests that non-equity forms of MNC participation are farther
expanded in the sectors which account for a larger share of receipts of royalties and
licence fees from unaffiliated persons in all receipts of them by a parent company.
Table 4 indicates direct investment income and receipts of royalties and licence
fees by industry of U.S. parent. In 2004, total receipts of royalties and licence fees
accounted for $54 billion, the proportion of which to direct investment income
represented 25.9%. In the manufacturing industry, receipts of royalties and licence fees
accounted for $34 billion, the proportion of which to direct investment income
represented 23.5%, and the share of receipts of royalties and licence fees from affiliates
in total receipts was 54.5%. However, its affiliates accounted for 67.9% in 1999 (U.S.
Department of Commerce, 2004), then it drastically decreased by 13.4 percent points in
5years. The large share of receipts of royalties and licence fees from affiliates in total
receipts is evidence of high level of intra-firm transactions in the manufacturing industry
in previous periods. However, the drastic decline of the share may reflect the growth of
outsourcing of manufacturing facilities by manufacturing MNCs in recent years.
Within service industries, there are many differences in the characteristics of the
various sectors. In information and wholesale industries, the share of receipts of royalties
and licence fees from affiliates accounted for 83.6% and 81.8% respectively. It implies
that MNCs in these industries highly internalize their own intangible assets and that they
choose direct investment as a participation form in foreign markets.
Whereas, in retail trade, administration, support, and wastes management, and
accommodation and food services, the share of receipts of royalties and licence fees from
affiliates was relatively low: 61.5%, 66.9%, and 70.5% respectively. In these sectors,
non-equity forms may play a more important role for the penetration of foreign markets
by MNCs.
As a whole, the share of receipts of royalties and licence fees from affiliates in
most service industries are higher than manufacturing. Therefore, the role of non-equity
18
forms of penetration seems not so important in service industries. However, the
proportion of receipts of royalties and licence fees to direct investment income in most
service industries are higher than in manufacturing, and this implies that the receipts of
royalties and licence fees are one of important sources of profits in these industries.
4-3
Service MNCs and Intra-Firm Trade
The third feature of service MNCs is that the share of local sales in total sales by foreign
affiliates is remarkably high. Traditional local market-oriented services, such as finance
and retail trade, have dominated services FDI in most countries. Furthermore, services
FDI is growing in such industries as telecommunications, electricity and water supply in
recent years, because of deregulation and liberalization of these industries in many
countries. Service MNCs have to rely largely on stand-alone affiliates which often are
operating similar activities to their parent companies’, because many services are nontradable and require face-to-face contact between suppliers and consumers. However, as
the tradability revolution increases international trade of information-intensive services,
the offshoring of services by manufacturing and service MNCs can be expected to expand
their sales to home countries and other countries.
The purpose of this section is to analyse intra-firm trade of service MNCs by the
use of the statistics of U.S. international service trade and sales through affiliates5. As
Table 5 shows, the share of local sales in total sales of services by U.S. affiliates
accounted for 77.5% in 2004. It indicates a remarkably high percentage compared to the
share of local sales in total sales of goods by U.S. manufacturing affiliates, which
accounted for only 57.2% in 2004.
Although, most service MNCs are highly oriented toward local markets, they are
classified into three types of industries from the detailed analysis of sales of services by
U.S. affiliates. The first type is the group of extremely high local market-oriented sectors,
such as broadcasting (except internet) and telecommunications, advertising and related
services, construction, retail trade, administration, support, and waste management,
5
The data used in this section, include only majority owned foreign affiliates (MOFA).
19
healthcare and social services, and accommodation and food services6. It is apparent that
the main purpose of foreign investment by MNCs in these sectors is the supply of
services to local markets. Furthermore, the affiliates in these sectors have only a small
share of intra-firm sales; moreover most affiliates in these sectors are stand-alone.
The second type is relatively local market-oriented yet, it also has the possibility
of building global network services. In such sectors as finance and insurance,
management, scientific, and technical consulting, transportation and warehousing, and
real estate and leasing, the sales of affiliates is directed not only to local market but also
to the U.S. or/and other countries. Formerly, these sectors have been considered to be
exclusively local market-oriented, but recently they have been building global network
through intra-firm sales.
The third type in the group builds the global intra-firm trade network of MNC
and global international trade network. In this group, the share of local sales in total sales
is relatively small. In wholesale trade, the share of local sales accounted for only 57.8%,
the share of sales to other foreign countries accounted for 33.5% and the share of intrafirm sales was 27.5% on the contrary. In architectural, engineering, and related services,
the share of local sales accounted for 69.4% and the share of sales to other foreign
countries accounted for 27.5%, although the share of intra-firm sales was only 11.3%.
This pattern might reflect the international movement of service consumers from other
foreign countries. In agriculture, forestry, fishing, and hunting, the share of local sales
accounted for 49.7% and intra-firm sales accounted for 44.8%; the affiliates in this sector
are integrated to their parent companies. In management of non-bank companies and
enterprises, the share of local sales accounted for only 46.7%; at the same time affiliates
in this sector had a large share of sales both to other foreign countries and to the U.S.,
which accounted for 54.3% and 7.9% respectively. Furthermore, the share of intra-firm
sales accounted for 51.3%. MNCs in this sector outsource and export services to foreign
countries through offshoring by using their global networks.
5. Summary and Conclusions
6
The affiliates of utilities such as electricity, gas and water supply had also high local market-orientation in
1999: it accounted for 99.0%, although the relevant share data was not available for confirmation in the
2004 edition.
20
This paper has explained the central importance of characteristics particular to service
trade and service MNCs. GATS identifies service trade with four modes of supplying
services to non-residents. Mode 1 is cross border supply of services, mode 2 is
consumption abroad, mode 3 is commercial presence, and mode 4 is presence of a natural
person. Mode 1, 2 and 4 are applicable to the international trade in the IMF BOP Manual.
However, service delivered within a consumer country by a foreign affiliate of a MNC is
considered a transaction between same residents, and then the international transaction in
mode 3 is not defined as international trade in the IMF BOP Manual.
The first major finding is that it is impossible to apply traditional trade theory,
which is based on comparative advantage, to mode 3 of service trade. The advantage of
the service produced directly by a foreign affiliate or an alliance company, which is the
service trade of mode 3, reflects the competition among service producing companies in a
consumer country. Therefore, in this case, the probability of exporting the service
depends not on the comparative advantage but on the competitive advantage of the
service producing company.
The second is that the growth of services FDI is caused from global deregulation
and liberalization in service markets and by the tradability revolution through the
development of information technology. Furthermore, manufacturing MNCs also
increase services FDI in the process of outsourcing their activities. 48% of all assets of
affiliates operating in service industries were invested by non service MNCs, especially
manufacturing MNCs in 2004. Manufacturing MNCs are making their own international
network system by investing not only in manufacturing but also in service industries such
as international trade, finance and business services. The increase of direct investment in
service industries by manufacturing MNCs also means that these MNCs tend to shift
abroad their non-manufacturing activities.
The third finding is that the characteristics of service MNCs different from
manufacturing MNCs are identified in the following three aspects.
(1) The competitive advantages of service MNCs are different from those of
manufacturing MNCs. In the supply of many services, all clients face a major problem of
uncertainty as to the quality of the service supplied. Therefore, clients resort to some
21
surrogates to assess the quality, such as relying on reputation. Excellent global reputation
is required to achieve a global competitive advantage. One of the most important signs of
the excellent global reputation is the development of international brands. The
international brands are required to be standardised quality while they are required to be
individualized to the requirements of specific clients. Therefore, the quality of services
plays an important role among non-price competition factors.
(2) Non-equity forms of penetration are important in a number of service
industries. It seems that non-equity forms of MNC penetration are farther expanded in the
sectors which account for a larger share of receipts of royalties and licence fees from
unaffiliated persons in all receipts of them by a parent company. The U.S. direct
investment statistics in 2004 indicated that the share of royalties and licence fees from
foreign affiliates of U.S. MNCs in most service industries was higher than manufacturing.
Therefore, the role of non-equity forms of penetration seems not so important in service
industries. However, the proportion of receipts of royalties and licence fees to direct
investment income in most service industries were higher than manufacturing. It implies
that the receipts of royalties and licence fees are one of the important sources of profits in
these industries.
(3) The share of local sales in total sales by foreign affiliates of most service
MNCs is remarkably high. However, they are classified into three types of industries
from the detailed analysis of sales of services by foreign affiliates of U.S. MNCs. The
first type is the group of extremely high local market-oriented sectors. The second type is
relatively local market-oriented yet, it also has a possibility of building global network
services. The third type in the group builds the global intra-firm trade network of MNC
and global international trade network.
Finally, a number of important limitations need to be considered. First, there
were not sufficient data to illustrate fully the service trade and services FDI. Second, not
all sectors of the service industry were analyzed to illustrate the characteristics of service
MNCs. This is because the data on service trade, services FDI and service MNCs are not
available for all countries, but only restricted to some countries such as the United States.
Considerably more work will need to be done to determine the full characteristics of
service MNCs.
22
References
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24
Appendix
Chart 1. The four supply mode of international trade in
services
COUNTRY A
COUNTRY B
Mode 1: Cross-border supply
The service crosses the border
Consumer
From A
Supplier
Mode 2: Consumption abroad
Consumer
From A
The consumer goes abroad
Consumer
From A
Service
Supplier
supply
Mode 3: Commercial presence
Consumer
From A
Service
Foreign
affiliate
Direct investment in county A
Company
supply
Mode 4: Presence of a natural person
Consumer
From A
Service
supply
Natural
person
Self-employed goes to country A
Natural
person
or employee sent by firm from B
Source: Lindner, A., Cave, B., Deloumeaux, L., & Magdeleine, J. (2001: 6).
25
Chart 2. The export of management and service in mode 3
COUNTRY A
COUNTRY B
Direct investment
Consumer
From A
Foreign
affiliate
The export of
service in
mode 3
MNC
The export of management
26
Table 1. World Inward FDI Stock, by Sector and Industry. 1990 and 2007
(Millions of dollars)
1990
World
Sector/industry
Developed Countries
Developing economies
Developed countries
73.8%
18.7% 1,942,116 11,583,162
81.3%
Total
362,632
1,579,483
73.7%
16.7%
83.3%
Primary
863,657
181,854
30,349
151,505
76.6%
19.8%
80.2%
Manufacturing
3,251,613
798,598
158,026
640,572
72.9%
17.9%
82.1%
Services
7,300,508
947,701
169,243
778,457
78.7%
30.0%
70.0%
Electricity, gas and water
271,469
10,134
3,044
7,090
66.4%
24.8%
75.2%
Construction
90,160
22,171
5,501
16,670
82.9%
11.3%
88.7%
Trade
1,376,703
228,197
25,855
202,342
70.3%
18.3%
81.7%
Hotels and restaurants
75,046
25,850
4,730
21,120
71.8%
44.9%
55.1%
Transport, storage and communications
660,982
29,577
13,293
16,284
80.8%
24.8%
75.2%
Finance
2,457,410
384,035
95,288
288,748
52.5%
12.0%
88.0%
Business activities
1,536,639
139,285
16,682
122,603
98.3%
100.0%
Public administration and defence
21,643
59
59
88.9%
100.0%
Education
7,817
94
94
82.9%
100.0%
Health and social services
25,838
992
992
67.0%
0.1%
99.9%
Community, social and personal service activities
31,874
13,352
20
13,332
88.7%
4.0%
96.0%
Other services
182,667
74,403
2,988
71,415
98.7%
9.1%
90.9%
Unspecified tertiary
562,259
19,551
1,783
17,768
100.0%
Private buying and selling of property
6,043
64.0%
35.9%
64.1%
Unspecified
161,341
13,963
5,014
8,949
* A considerable share of investment in business activities is in Hong Kong (China), which accounted for 88% of developing economies and 40% of
the world total in 2007. Hong Kong (China) data include investment holding companies.
A "-" indicates that data are not available.
Source: UNCTAD.(2009b), Annex table A.I.4.
2007
Developing economies
24.3%
3,816,510
20.5%
240,791
21.6%
916,814
25.8%
2,586,293
20.6%
71,007
30.0%
40,761
15.8%
262,080
27.3%
29,158
26.8%
246,265
17.9%
544,898
45.8%
1,341,328 *
1.5%
332
9.9%
874
15.9%
4,946
29.9%
14,208
11.3%
23,257
1.3%
7,179
28.8%
72,612
South-East Europe
and CIS
1.9%
297,204
5.8%
67,988
1.8%
77,407
1.3%
133,682
0.7%
2,379
3.6%
4,887
1.3%
21,432
2.3%
2,477
1.4%
13,219
1.3%
39,586
1.6%
47,701
0.1%
33
1.2%
105
1.2%
368
3.1%
1,479
0.0%
16
7.2%
18,126
World
15,696,876
1,172,436
4,245,834
10,020,483
344,855
135,807
1,660,215
106,680
920,466
3,041,894
2,925,668 *
22,009
8,797
31,152
47,561
205,941
569,437
6,043
252,079
27
Table 2. World Outward FDI Stock, by Sector and Industry. 1990 and 2007
(Millions of dollars)
1990
2007
Sectors/industry
Developed countries Developing economies
World
Developed countries
Developing economies
Total
98.9%
1.1% 1,785,584
88.1% 1,909,575
11.8%
1,765,278
20,306
14,277,765
Primary
98.4%
1.6%
95.6%
3.9%
154,668
2,583
157,251
1,110,525
45,152
Manufacturing
99.1%
0.9%
96.1%
3.9%
769,479
7,217
776,696
4,051,964
163,876
Services
98.8%
1.2%
84.0% 1,666,368
15.9%
836,691
9,843
846,534
8,833,715
Electricity, gas and water
94.5%
5.3%
9,306 100.0%
9,306
201,435
11,283
Construction
99.4%
0.6%
86.2%
14.7%
17,650
107
17,757
55,890
9,503
Trade
98.8%
1.2%
86.2%
13.7%
137,858
1,714
139,573
928,547
148,114
Hotels and restaurants
92.2%
7.8%
6,896 100.0%
6,896
114,918
9,733
Transport, storage and communications
98.8%
1.2%
89.6%
10.4%
38,471
455
38,925
652,586
75,763
Finance
98.6%
1.4%
92.2%
7.8%
416,522
6,114
422,636
3,248,047
274,789
Business activities
98.5%
1.5%
71.2% 1,115,725 *
28.6%
81,748
1,268
83,016
2,776,980
Public administration and defence
99.7%
0.0%
7,982
4
Education
97.8%
1.9%
417 100.0%
417
1,518
29
Health and social services
96.8%
3.1%
828 100.0%
828
2,310
75
Community, social and personal service activities
93.8%
6.2%
3,315 100.0%
3,315
65,033
4,275
Other services
99.8%
0.2%
95.8%
4.2%
108,965
175
109,140
233,149
10,327
Unspecified tertiary
99.9%
0.1%
98.8%
1.2%
14,714
10
14,724
545,319
6,748
Private buying and selling of property
100.0%
862 100.0%
862
2,447
Unspecified
84.4%
15.6%
88.8%
10.9%
3,578
663
4,241
279,115
34,179
* A considerable share of investment in business activities is in Hong Kong (China), which accounted for 94% of developing economies and 28% of
the world total in 2007. Hong Kong (China) data include investment holding companies.
A "-" indicates that data are not available.
Source: UNCTAD.(2009b), Annex table A.I.5.
South-East Europe and
CIS
0.1%
19,884
0.5%
5,487
0.0%
1,603
0.1%
11,765
0.2%
514
-0.9%
-581
0.1%
1,063
0.0%
43
0.0%
53
0.1%
1,838
0.2%
8,809
0.3%
23
0.3%
4
0.3%
1,029
World
16,207,225
1,161,165
4,217,443
10,511,848
213,233
64,812
1,077,723
124,694
728,402
3,524,674
3,901,514 *
8,009
1,552
2,386
69,308
243,476
552,067
2,447
314,323
28
Table 3. Assets of MOFA of U.S. MNC. 2004
(Millions of dollars)
All industties
Mining
Utilities
Manufacturing
Wholesale trade
Information
Finance (except depository institutions) and insurance
Professional, scientific, and technical servises
Other industries
Agriculture, forestry, fishing, and hunting
Construction
Retail trade
Transportation and warehousing
Real estate and rental and leasing
Management of nonbank companies and enterprises
Administration, support, and waste management
Health care and social assistance
Accommodation and food services
Miscellaneous services
Source: U.S. Department of Commerce.(2008).
Assets of
Assets of
Affiliates by Affiliates by
Industry of Industry of
Affiliate
U.S. Parent
(1)
(2)
8,688,553
8,688,553
352,133
140,237
70,823
133,527
1,446,847
4,984,908
540,076
178,848
131,423
179,528
3,323,248
2,379,663
172,982
264,913
2,651,020
426,930
3,537
1,533
7,740
5,160
84,427
172,516
39,912
34,618
123,963
29,570
2,291,368
42,006
37,491
64,160
2,238
3,012
45,867
41,814
14,477
32,541
Differences
(1)-(2)
0
211,896
-62,704
-3,538,061
361,228
-48,105
943,585
-91,931
2,224,090
2,004
2,580
-88,089
5,294
94,393
2,249,362
-26,669
-774
4,053
-18,064
29
Table 4. Direct Investment Income and Receipts of Royalties and Licence Fees of U.S. Parent by Industry. 2004
(Millions of dollars)
Direct
investment
income
Receipts of royalties and licence fees
Total
54,005
(D)
6
33,523
1,773
5,166
3,477
(D)
(D)
(D)
329
(D)
(D)
(D)
(D)
4
31
4,331
(*)
(D)
1,572
(D)
(D)
4
874
3
1,746
31
From affiliates
From others
Share of affiliates
All industries
208,792
35,551
18,453
Mining
8,409
165
(D)
Utilities
3,065
6
1
Manufacturing
142,686
18,277
15,246
Wholesale trade
7,450
1,451
322
Information
13,273
4,321
845
Publishing industries
8,753
3,296
181
Motion picture and sound recording industries
292
153
(D)
Broadcasting (except internet) and telecommunications
2,820
(D)
(D)
Internet, data processing, and other information services
1,408
(D)
(D)
Finance (except depository institutions) and insurance
12,506
(D)
(D)
Professional, scientific, and technical services
8,464
(D)
274
Architectural, engineering, and related services
199
(D)
0
Computer systems design and related services
6,250
(D)
242
Management, scientific, and technical consulting
742
(D)
(D)
Advertising and related services
239
4
0
Other
1,035
(D)
(D)
Other industries
12,939
2,889
1,442
Agriculture, forestry, fishing, and hunting
40
(*)
0
Construction
72
(D)
(D)
Retail trade
4,551
966
606
Transportation and warehousing
1,843
(D)
2
Real estate and rental and leasing
825
43
(D)
Management of nonbank companies and enterprises
2,459
0
4
Administration, support, and waste management
676
585
289
Health care and social assistance
108
0
3
Accommodation and food services
1,765
1,231
515
Miscellaneous services
600
28
3
An asterisk "(*)" indicates a nonzero value between -$500,000 and $500,000.
A "(D)" indicates that the data in the cell have been suppressed to avoid disclosure of data of individual companies.
A "-" indicates that data are not available.
Source: U.S. Department of Commerce.(2008).
65.8%
100.0%
54.5%
81.8%
83.6%
94.8%
100.0%
66.7%
61.5%
0.0%
66.9%
0.0%
70.5%
90.3%
Proportion of receipts of royalties
and licence fees to direct investment
income
From affiliates From others
Total
25.9%
17.0%
8.8%
2.0%
0.2%
0.2%
0.0%
23.5%
12.8%
10.7%
23.8%
19.5%
4.3%
38.9%
32.6%
6.4%
39.7%
37.7%
2.1%
52.4%
2.6%
3.2%
0.0%
3.9%
1.7%
1.7%
0.0%
3.0%
33.5%
22.3%
11.1%
0.0%
34.5%
21.2%
13.3%
0.1%
5.2%
0.2%
0.0%
0.2%
129.3%
86.5%
42.8%
2.8%
0.0%
2.8%
98.9%
69.7%
29.2%
5.2%
4.7%
0.5%
30
Table 5. Share of Specific Types of Sales in Total Sales by U.S. MOFA, Industry Breakdown. 2004
Sales to
Sales to the
other
Intra-firm Local sales Local sales
Local sales
U.S.
foreign
sales
of goods of services
countries
All industries
61.9%
10.7%
27.4%
29.0%
59.0%
77.5%
Mining
51.4%
18.1%
30.5%
33.5%
48.8%
75.2%
Utilities
0.4%
11.4%
Manufacturing
57.4%
13.0%
29.6%
35.7%
57.2%
80.1%
Wholesale trade
57.8%
8.7%
33.5%
27.5%
57.6%
63.9%
Information
69.4%
4.3%
26.3%
16.3%
34.8%
80.2%
Publishing industries
50.1%
3.4%
46.5%
17.9%
Motion picture and sound recording industries
19.6%
6.7%
Broadcasting (except internet) and telecommunications
82.2%
3.8%
14.0%
10.8%
34.6%
82.2%
Internet, data processing, and other information services
14.6%
26.9%
Finance (except depository institutions) and insurance
67.0%
11.5%
21.5%
26.2%
62.8%
69.9%
Professional, scientific, and technical services
13.3%
15.9%
Architectural, engineering, and related services
69.4%
3.1%
27.5%
11.3%
75.4%
68.8%
Computer systems design and related services
9.9%
14.6%
Management, scientific, and technical consulting
75.0%
5.9%
19.1%
24.1%
62.1%
75.0%
Advertising and related services
94.8%
0.4%
4.9%
3.8%
94.8%
Other
18.9%
26.9%
Other industries
9.9%
9.6%
Agriculture, forestry, fishing, and hunting
49.7%
4.2%
46.2%
44.8%
50.0%
44.3%
Construction
93.0%
0.8%
6.2%
7.2%
93.9%
81.3%
Retail trade
94.3%
2.2%
3.5%
4.6%
94.2%
100.0%
Transportation and warehousing
65.6%
14.1%
20.3%
18.2%
81.3%
65.3%
Real estate and rental and leasing
72.4%
5.9%
21.7%
26.5%
43.5%
82.9%
Management of nonbank companies and enterprises
46.7%
7.9%
45.3%
51.3%
19.3%
48.0%
Administration, support, and waste management
80.3%
3.5%
16.2%
9.3%
Health care and social assistance
99.3%
0.6%
0.2%
0.4%
Accommodation and food services
99.7%
0.2%
0.2%
0.1%
100.0%
99.7%
Miscellaneous services
9.6%
4.2%
84.3%
A "-" indicates that data are not available.
Source: U.S. Department of Commerce.(2008).
31