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Free-standing companies primarily operated domestically during the nineteenth century.
Free-standing companies primarily operated domestically during the nineteenth century.
False
Most Dutch free-standing companies in 1914 were active in Indonesia.
Most Dutch free-standing companies in 1914 were active in Indonesia.
True
The absence of major international wars during the nineteenth century increased risks for cross-border businesses.
The absence of major international wars during the nineteenth century increased risks for cross-border businesses.
False
Uncompensated seizure of property was viewed as a legitimate act according to international law in the nineteenth century.
Uncompensated seizure of property was viewed as a legitimate act according to international law in the nineteenth century.
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European governments supported and enforced the principles of international property law throughout the world.
European governments supported and enforced the principles of international property law throughout the world.
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The Mexican nationalization of foreign oil companies in 1938 asserted foreign control over natural resources.
The Mexican nationalization of foreign oil companies in 1938 asserted foreign control over natural resources.
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By the early 1920s, US tariffs had reached their highest ever levels due to the Fordney-McCumber tariff.
By the early 1920s, US tariffs had reached their highest ever levels due to the Fordney-McCumber tariff.
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The Smoot-Hawley Act of June 1930 decreased US tariff levels.
The Smoot-Hawley Act of June 1930 decreased US tariff levels.
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During World War I, the United States used passports for the first time for entering and leaving the country.
During World War I, the United States used passports for the first time for entering and leaving the country.
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The Immigration Act of 1921 allowed for an annual maximum of over a million immigrants into the United States.
The Immigration Act of 1921 allowed for an annual maximum of over a million immigrants into the United States.
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The end of the warfare period from 1790 to 1815 led to a century of global conflict.
The end of the warfare period from 1790 to 1815 led to a century of global conflict.
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Liberal economic policies promoted international trade by maintaining monopolies.
Liberal economic policies promoted international trade by maintaining monopolies.
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By the late nineteenth century, international trade was growing slower than world output.
By the late nineteenth century, international trade was growing slower than world output.
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The Gold Standard helped reduce foreign exchange risks by fixing national currencies to gold prices.
The Gold Standard helped reduce foreign exchange risks by fixing national currencies to gold prices.
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Britain was the largest capital importer during the adoption of the Gold Standard.
Britain was the largest capital importer during the adoption of the Gold Standard.
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By 1900, 14 percent of the population of the United States were immigrants.
By 1900, 14 percent of the population of the United States were immigrants.
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Work visas were commonly required for European emigrants traveling to the Americas in the 19th century.
Work visas were commonly required for European emigrants traveling to the Americas in the 19th century.
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Falling steerage costs made emigration easier for a limited number of people in the 19th century.
Falling steerage costs made emigration easier for a limited number of people in the 19th century.
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The Dutch East Indies, known today as Indonesia, was a colony of Brazil.
The Dutch East Indies, known today as Indonesia, was a colony of Brazil.
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Following their war with Spain, the United States occupied both Cuba and the Philippine Islands.
Following their war with Spain, the United States occupied both Cuba and the Philippine Islands.
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The first global economy was primarily built by large corporations and government entities.
The first global economy was primarily built by large corporations and government entities.
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In the 1830s, British merchants began to create large-scale factories across borders.
In the 1830s, British merchants began to create large-scale factories across borders.
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The concept of 'professional managers' was common in the early nineteenth century.
The concept of 'professional managers' was common in the early nineteenth century.
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Overseas banks were established to facilitate banking in various colonies such as Australia and Canada.
Overseas banks were established to facilitate banking in various colonies such as Australia and Canada.
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The investments made by early cross-border enterprises were characterized by their high monetary value.
The investments made by early cross-border enterprises were characterized by their high monetary value.
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Family members were often chosen as representatives in cross-border business ventures due to trust.
Family members were often chosen as representatives in cross-border business ventures due to trust.
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The Industrial Revolution in Britain heavily relied on capital-intensive industries like chemicals and machinery.
The Industrial Revolution in Britain heavily relied on capital-intensive industries like chemicals and machinery.
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During the early twentieth century, the automobile industry primarily used coal as its main fuel source.
During the early twentieth century, the automobile industry primarily used coal as its main fuel source.
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The United States was characterized by a rapidly decreasing market and limited land for agriculture during the era of economic growth.
The United States was characterized by a rapidly decreasing market and limited land for agriculture during the era of economic growth.
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The McKinley Act of 1890 lowered US tariffs on protected commodities to promote foreign competition.
The McKinley Act of 1890 lowered US tariffs on protected commodities to promote foreign competition.
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The Suez Canal, opened in 1869, provided a longer route for trade between Europe and Asia.
The Suez Canal, opened in 1869, provided a longer route for trade between Europe and Asia.
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Improvements in sailing-ship technology produced an increase in ocean freight rates during the first half of the century.
Improvements in sailing-ship technology produced an increase in ocean freight rates during the first half of the century.
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The telegraph was considered a significant innovation in communication during the nineteenth century.
The telegraph was considered a significant innovation in communication during the nineteenth century.
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The opening of the Panama Canal in 1915 did not significantly reduce sea journey times or costs.
The opening of the Panama Canal in 1915 did not significantly reduce sea journey times or costs.
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London and Paris were connected by an electric telegraph in 1852.
London and Paris were connected by an electric telegraph in 1852.
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The first successful trans-Atlantic cable connection occurred in 1870.
The first successful trans-Atlantic cable connection occurred in 1870.
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Limited liability became fully available in Britain in 1861.
Limited liability became fully available in Britain in 1861.
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The emergence of modern industrial enterprises was crucial to the development of mass production and mass marketing.
The emergence of modern industrial enterprises was crucial to the development of mass production and mass marketing.
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By 1914, almost all countries were free-trading, with only a few exceptions.
By 1914, almost all countries were free-trading, with only a few exceptions.
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Telegraphs and cables were part of the technological advancements in the 19th century.
Telegraphs and cables were part of the technological advancements in the 19th century.
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The corporate governance reforms of the 19th century did not impact the size of firms.
The corporate governance reforms of the 19th century did not impact the size of firms.
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The 18th century saw the majority of firms as large corporations.
The 18th century saw the majority of firms as large corporations.
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Study Notes
Multinational and Globalization
- The Industrial Revolution facilitated the growth of trade, with external factors playing a key role.
- Imperialism led to forced migration, as people were moved as slaves.
- There was a rapid increase in capital flows across borders.
- Britain's manufactured textiles significantly impacted global markets, displacing established industries in China and India.
- Newly industrialized regions sought markets for their products, materials, and food supplies to grow their populations.
- The end of the Napoleonic Wars led to a period of relative peace, which stimulated international trade.
- Liberal economic policies, with a decline in monopolies, further fueled the growth of international trade.
- Tariffs decreased significantly in the mid-19th century.
- International trade grew much more rapidly than global output in the late 19th century.
- Capital movements were relatively unrestricted, and the adoption of the Gold Standard reduced foreign exchange risks.
- Britain was a major exporter of capital.
- London was the global financial center, with Sterling being the world's strongest currency.
- The 19th century saw 60 million Europeans immigrate to the Americas, with fewer restrictions on travel and work visas.
- Income discrepancies between rich and poor nations narrowed.
- Slavery continued in the United States and Brazil until the late 1800s.
- Forced labor from Asia was used in plantations and infrastructure projects.
- The US occupied Cuba and the Philippines following a war with Spain.
- Japan was forced to open its borders to foreigners in 1853. By 1914, they had occupied Korea and Taiwan.
- The British Empire expanded in Asia and Africa during the 19th century.
- Other European powers (France, Belgium, Portugal, and Germany) also controlled significant parts of Africa.
- The Dutch East Indies (Indonesia) was a Dutch colony.
Growth of Multinational Corporations
- Businesses and entrepreneurs created extensive global economies in the 19th century.
- Firms from the 1820s began cross-border investments.
- Businesses used employees and representatives in multiple locales.
- Large-scale operations and sustained investments were made, not relying on monopolies.
- Entrepreneurs increasingly established factories across borders, though these were not necessarily large.
- This international growth facilitated increased trade flows.
- Multinational companies discovered and exploited resources and food supplies globally.
- By 1914, manufacturing encompassed numerous goods, including chemicals, pharmaceuticals, electricals, machinery, automobiles, tires, and branded food products and cigarettes.
Foreign Direct Investment (FDI)
- In 1914, Western Europe, especially the UK, was the dominant source of global FDI.
- FDI was dispersed across the globe, with significant investment also in Latin America and Asia.
- A significant portion (half) of FDI was in natural resources.
- One third went to services including financing, insurance, commodity transport, and food supplies.
- Manufacturing was concentrated in Western European and North American industrial economies.
Organizational Diversity
- Entrepreneurs took advantage of the globalizing economy.
- Firms like Siemens and Singer started their value-added activities domestically before expanding.
- Managerial and technological competencies nurtured in the home country aided international investment efforts.
- Firms utilized diverse organizational structures when operating across borders.
- Many companies operated abroad without a primary domestic presence, becoming "free-standing" companies.
- European companies, particularly British and Dutch, used this organizational structure extensively in the nineteenth century. Many operated in the natural resources or services sectors, with occasionals ventures in processing. Some companies concentrated their activity in one overseas location.
Policy Environment for Trade
- The absence of major international conflicts reduced the risks associated with cross-border business.
- International property law ensured that property rights were broadly protected globally.
- 17th century governments began to reduce trade risks through bilateral treaties that protected foreign property.
- These practices solidified into international law in the 19th century. Uncompensated seizure of foreign property was considered robbery.
- European governments supported and enforced the principles throughout much of the globe.
Drivers of Multinational Growth
- The spread of global economic growth drove a rising demand for raw materials, foodstuffs, and markets for manufactured products.
- The Industrial Revolution in Britain spawned capital-intensive industries like chemicals, machinery, and foods.
- Increased chemical, electrical, and automobile production required abundant minerals like copper, aluminum, and zinc creating a high demand for them.
- Kerosene and petroleum as fuels for new transportation methods (trains, steamships, and personal vehicles) prompted a dramatic shift in global energy markets.
- The growing US market, rich in resources and agricultural land, fueled demand, stimulating European expansion to other markets.
Liberal Economic Policies
- Governments reduced intervention in economic activities as significant policies.
- Most governments treated foreign and domestic enterprises equally.
- Gradually, trade protectionism (raising tariffs) increased.
- The McKinley Act of 1890 increased US tariffs to 50% for many foreign goods. This limited international goods and services entering the US market.
Improvements in Transport and Communication
- The spread of railroads in the 1830s led to faster and more reliable transport.
- Innovations in sailing ship technologies reduced ocean freight costs.
- Steamships became more prevalent in the mid-19th century, shortening shipping times.
- The Suez Canal (1869) provided a shorter route between Europe and Asia.
- The Panama Canal (1915) further reduced travel times and costs.
- The electric telegraph revolutionized communication, connecting major cities.
- The first trans-Atlantic cable (1866) connected Europe and North America, and later, 1870, established a cable to Australia
Types of Firms
- In the 18th century, most businesses were small, family-owned concerns where owners were personally liable for all debts.
- Large-scale, chartered trading companies were prominent in Europe.
- 19th-century legal reforms allowed for corporate forms of organization.
- Limited liability became common, lowering investment risk, enabling larger businesses.
Emergence of the Modern Industrial Enterprise
- The industrial enterprise became pivotal in technological development and expanding manufacturing sectors.
- Changes in technology and market structures influenced firm development from personal management to the modern corporation.
- The spread of railroads, telegraphs, and steam engines permitted mass production and marketing on a global scale.
Globalization Challenged and Reversed (1914-1950)
- The start of World War I marked a key inflection point in the first global economy.
- Many nations transitioned away from free trade.
- By 1914, only a few nations continued free-trade policies.
- Backlash against immigration became frequent, with countries like the US and Australia pursuing measures to limit immigration (e.g. The White Australia Policy).
- The worldwide economic downturn (The Great Depression) in the 1930s severely impacted global trade.
- Worldwide declines in GDP, unemployment and falling commodity prices weakened global trade efforts.
Backlash against Global Economy
- Nationalist sentiments and government actions responded negatively to the rise of foreign influence in countries' economic structures.
- Sequestration of foreign assets was utilized during World War I.
- Xenophobic and nationalistic trends during the 1920's and 1930's increasingly limited foreign companies activities in countries.
- Nationalization of resources, like the Mexican oil industry in 1938, asserted control over resources.
Trade Protectionism
- Trade protectionism increased sharply in the early 1920s, after World War I.
- The US raised tariffs to historically high levels with the Fordney-McCumber tariff.
- Many countries implemented significant trade restrictions like tariffs and quotas to shield their domestic industries.
- The Smoot-Hawley Tariff Act deepened the global crisis by increasing US tariffs, triggering retaliatory measures globally.
Backlash Against Migration
- Governments during World War I imposed more strict requirements for travel (e.g., passports).
- Visa requirements for foreign visitors became commonplace, and restrictions on workers were also introduced in this period.
- Limits were imposed on the number of annual immigrants entering many nations. The act that created these caps was passed in 1921 in the US.
International Monetary System
- The period following World War I saw the demise of the international Gold Standard.
- Severe inflation during the Great Depression in the 1930s made maintenance of the gold standard problematic for many countries..
- This led to the dismantling of the international monetary system as countries abandoned the gold standard.
- Regions developed their own currency blocs, and this undermined further global coordination.
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Description
Explore the evolution of international law and trade dynamics from the nineteenth century to the early twentieth century. This quiz covers topics such as the role of European governments, the impact of U.S. tariffs, and significant historical events like the Mexican nationalization of foreign oil. Test your knowledge on how these factors shaped international business practices.
