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From NY to Istanbul
Foreign companies establish affiliates in global financial centers like New York City to gain access to local industry knowledge and networks, serve as a platform to clients in the US and overseas, and leverage the infrastructure and resources of the city. According to surveys of foreign affiliates in NYC, most come for financial services and business support activities, source some local inputs, and transfer knowledge and profits back to their headquarters while also contributing high-value jobs and links to global markets. The surveys found that affiliates choose to remain in NYC due to its status as a global center but recommend improvements to taxes, transportation, and other costs of doing business.
From NY to Istanbul
- 1. From New Yorkto Istanbul
- 2. So many foreign companiesin New York Why are they here? What do they do here?
- 3. Why do companies investoverseas? What we know Relevance for New York Costs A good reason to leave NY Growth ?? Taxes Dreadful Resources In NY?? Something special about investment in cities? Global cities?
- 4. What do theydo when they come here?
- 5. Surveys of Foreign Affiliatesin New York, 1995, 2005 The research team: Mark Chadwin Andreas Grein Clifford Wymbs Lilach Nachum
- 6. Why does itmatter for a Global Financial Center? Majority – in financial services Business services - support Cluster effect, synergies Shared infrastructure Global linkages – global cities.
- 7. The Surveys Population: Allforeign affiliates in New York City The Weissman Center Directory of International Business 1995: Mailed questionnaire + interviews 67 responses 2005: Mailed questionnaire 142 responses (~10% response rate).
- 8. Why do theycome here? % sample Initially Current Establish presence in a global center 20% 20% Serve US clients 19 22 Exploit their firm specific advantages 20 12 Serve home clients overseas 11 11 Implement a specific activity for the entire corporation 9 11 Access NYC local resources 8 8 Tap into industry knowledge pool in NYC 8 8 Counteract or preempt competitors’ moves 4 6
- 9. Firms of differentsize come to NY for different reasons •Establish a presence •Leverage own knowledge •Exploit current suppliers •Use known processes •Focus on U.S. customers •Gain local industry knowledge •Leverage local suppliers •Be nimble and opportunistic Seek disruptive advantage to compete against larger firms as soon as possible Small Firms (sales < $100 mm) Large Firms (sales > $100 mm) Leverage cash advantage and size to create long-term momentum
- 10. Size Breakdown % totals Numberof employees Our sample Total in NYC Up to 10 37% 54% 11-30 31 21 31-50 13 5 51-100 5 11 Over 100 14 11 Average 144 94 Median 14 10
- 11. What do theydo here? NY Sales % total sales 0.4 0.17 0.36 0.07 % of sample 10% 25% 50% 75-100%
- 12. What do theydo here? NY purchases % total purchases 0.5 0.15 0.15 0.2 % of sample 10% 25% 50% 75-100%
- 13. Industrial Breakdown % sample FinancialServices 34% Retail 15 Tourism, Eating places 13 Manufacturing 13 Business services 12 Pharmaceuticals/Chemicals 8 Other Services 5
- 14. NY competitors %total competitors 0.35 0.3 0.22 0.13 % of sample 10% 25% 50% 75-100% Competitors located away from NY
- 15. Expatriates Employment % sample None1--5 6--10 11--15 16+ 25% 34% 6% 7% 28% Expatriates as % of total labor force
- 16. Frequency meetings with peoplefrom other companies % sample Monthly 22% Weekly 51% Several times per year 22% Other 5% Monthly 23% Weekly 45% Several times per year 20% Other 11% In the same Industry In other Industries
- 17. Purpose of meetings: %meetings are “very important” and “important” source of: Client specific knowledge 76% Industry specific knowledge 74 Business environment knowledge 69
- 18. Resource transfer: NY affiliates/HQs Mosttransfers - various kinds of knowledge: Professional Marketing Global market Knowledge transfer - two ways: parents - affiliates affiliates - parents NY affiliates recipients of capital.
- 19. Profits Transferred toHQs % sample None 1--25 26--50 51--75 76+ 46% 19% 7% 2% 25% Profits transferred to HQ as % of total profits
- 20. Country Breakdown % totals 20051995 Our sample Total in NYC Western Europe 44% 56% 42% Asia (Japan) 31 (77) 20 41 Latin America 9 6 3 Southeast Asia 7 3 5 Eastern Europe 5 6 - Africa 3 6 -
- 21. Mode of Establishment Greenfield:91.5% Of which 87% wholly-owned (100%) Acquisitions: 8.5% Of US-owned firm: 7.0% Of foreign-owned firm: 1.5%.
- 22. From NY tothe World NYC Washington, DC Miami Toronto Chicago Los Angeles London Paris Tokyo Hong Kong Singapore Sydney Top Networking Interests (% rated Important) San Francisco 76% 74% 69% 63%
- 23. Where in theWorld: Top city visits 1. Chicago 2. Los Angeles 3. Toronto 4. London 5. Tokyo 6. Paris 7. Hong-Kong 8. Singapore 9. Sidney 10. San Francisco, Washington DC, Miami
- 24. Choose NY Again? 2005 Yes – 90% No - 10% 1995 Yes - 82% No - 18%
- 25. Leave NY –if yes? 2005 Where to (most frequently mentioned): tri-state area, Chicago, Washington DC, Los Angeles 1995 Where to (most frequently mentioned): tri-state area, elsewhere in New York State, Colorado, Arizona Why? 57% tax savings
- 26. Recommendations for NY Mayor:Affiliates’ voice 2005 1995 Reduce taxes 45% Improve transportation/infrastructure 23 Improve security 11 Improve quality of service/business 7 Reduce cost of doing business 7 Improve quality of life 5 Reduce cost of living 3 Improve quality of life 24% Lower taxes 16 Improve transportation 15 Improve bureaucracy 15 Develop industrial & social policy 12 Develop affordable housing 9 Do PR on safety 4 Improve infrastructure 4
- 27. From NY toIstanbul Why do foreign affiliates come to global centers? Learning, knowledge acquisition Platform to the world What do they do/don’t in global centers? Customers, suppliers, competitors - elsewhere Local knowledge acquisition – own, HQs What do they contribute to global centers? High value jobs, capital, global links.