Financing Foreign Subsidiaries of U.S.- Controlled Multinational Enterprises*

In the conduct of the financial function the manager of a multinational enterprise ordinarily has a more complex undertaking than his domestic counterpart. This greater complexity arises in part because he is faced with the same problems but they are aggravated; for example, the multinational enterprise is likely to have more subsidiaries located greater distances from the parent. Then again, added complexity occurs because the manager must cope with problems that are unique to multinationality. Thus, he must deal in a number of currencies, understand the intricacies of different money markets, and cope with the laws of various foreign governments. Both types of problems—those similar to the domestic situation but aggravated and those unique to multinationality—are embraced in the financing of foreign subsidiaries. To illustrate the underlying difficulties, typical financing patterns are sketched in Exhibit I , in order of increasing complexity, although even the last one shown is still highly simplified. Exhibit t A portrays the case of a domestic corporation obtaining dollars from local financial sources.© 1970 JIBS. Journal of International Business Studies (1970) 1, 43–64