U.S. Subsidiary Adjustments to the Mexican Labor Market

The variance in production factors from country to country and the infeasibility of transferring many factors internationally leads to operating adjustments by foreign direct investors. The labor11“Labor” for the purpose of this paper is to include all non-personnel below the first level of supervision. factor in most less developed countries (LDCs) is substantially different from that in most developed countries due to the lower level of formal education completed and the dissimilarity of informal education or culture.22For a discussion see Endel J. Kolde. International Business Enterprise (Englewood Cliffs. New Jersey: Prentice- Hall, Inc., 1968), pp. 564–568. An international firm operating in an LDC must use local labor rather than import labor because of government restrictions and high transfer costs. The purpose of this study was to characterize the effects of labor differences on the manufacturing operations of U.S. firms in Mexico. Mexico was chosen for the study because the 698 U.S companies with investments there comprise 25 percent ($1,003 million) of the American manufacturing investment in LDCs.33Juvenal L. Angel, Directory of American Firms Operating in Foreign Countries (7th ed., New York: Regents Publishing Company, Inc., 1969): and Survey of Current business (October, 1970), p. 28.© 1971 JIBS. Journal of International Business Studies (1971) 2, 15–24