Foreign business control: the Canadian experience, 1973–1977

Abstract

Abstract. The purpose of this study is to review the operations of the controls on foreign direct investment, as established by the Foreign Investment Review Act passed in late 1973, and to assess their immediate and long‐term effects on the behaviour of foreign firms. To do so, the authors have drawn on data published by various government institutions, in particular by the Foreign Investment Review Agency. In addition, several interviews were conducted with officials of the latter and executives whose companies had been subject to the review process. Most of the interviews took place during the year 1977. Several conclusions emerge from the study. First of all, the recent drop in inflows of foreign direct investment can hardly be blamed on the legislation of 1973 and the setting‐up of the screening Agency. Rather, its causes are to be found in world phenomena and, more particularly, in structural changes taking place in the u.s. economy. In the long run, the behaviour of foreign companies in the presence of controls will vary in relation to firm‐specific factors, such as their particular motivation for expanding abroad and their internal organizational structure. Secondly, the Agency must be credited with tangible, though limited, achievements. It must be borne in mind that its effectiveness is closely related to the overall governmental policy toward foreign investors and that, on this account, no precise directions actually exist. Regarding its efficiency, the Agency is clearly in the process of learning how to deal with foreign firms and improvements in its bargainings are likely to take place as time passes. Finally, in spite of some positive aspects, there is a need to reassess the entry control system as it stands presently, in light of a (yet to come) coherent government industrial policy.