98 S.E.M. and the changing structure of eu manufacturing, 1987-1993

This paper reports the initial results from a project designed to track the evolution of industrial and corporate structure of EU manufacturing alongside the ongoing European integration process. At the heart of the work is the construction of an "EU market share matrix" for 1993. This includes estimates of the turnovers of a set of 300 leading manufacturing firms, disaggregated across nearly 100 industries, and then, in turn, across the individual member states. This allows us to estimate the extent of diversification and intra-EU multinationality for each of the firms, and the concentration of producers and measures of geographical concentration for each of the industries. When coupled with a similar matrix for 1987, first reported in Davies, Lyons et al. (1996), this provides a rich and detailed mapping of how these structural dimensions have changed with the final stage (so far as the legislation is concerned) of the European single market programme. In effect, our work provides a complement to the EC’s own evaluation (1996) which was derived mainly from published aggregate data on FDI, trade and mergers. In contrast, our work is more micro-based, using company accounts and emphasising industrial structure. Our main "headline" findings are that, on average, (I) concentration has remained stable, (ii) multinationality has increased rapidly - both the intra-EU multinationality of European firms and the inward multinationality of non-EU firms, (iii) diversification has decreased slightly. However, disaggregation in each case reveals an intriguing underlying picture of turbulence, and considerable inter-industry and inter-firm differences. For example, although concentration is stable on average, this hides often considerable turbulence of market shares. Moreover, there are signs that concentration has tended to increase in those industries in which integration has advanced most rapidly over this period. Similarly, although there is only weak evidence of "return to core business" in aggregate, this reflects the balance of opposing developments - increased diversification by many German firms, on the one hand, but de-diversification (and some signs of convergence) by firms from the other member states, on the other hand. Thirdly, preliminary analysis of our results on multinationality shows how they can be used to further our understanding of geographical concentration (or dispersion), and to distinguish between intra- and inter-industry multinationality. Thus, the paper serves two purposes. In addition to broadening our factual understanding of the impact of the SEM, it also sets out a research agenda of topics which deserve further, more disaggregated and analytical, research.