The Second World War, Neutrality and International Business: The Twin Structures of Swiss Multinational Enterprises to Address Political Risks


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Abstract

 

This paper analyzes the organization and strategy of F. Hoffmann-La Roche (pharmaceuticals), and Nestlé and Anglo-Swiss (condensed milk and other foods) from 1930s to the World War Two. It focuses on their organizational response to the political risks such as taxation and confiscation, and to the new opportunities in the emerging markets, through which it reveals what the neutrality policy signified and how elements like war and security influenced the development of European multinational enterprises.

After the mid 1990s, study of the corporate behavior during 1930s and the WWII intensified, adding a new perspective to the existing works on businesses in Nazis Germany and areas under its control. These researches positioned the businesses in neutral states (Sweden, Switzerland, Portugal, etc.) and countries under occupation (Benelux countries, Norway, Denmark, etc.) (Lund [2006]) in a new context. The study on Swiss enterprises developed exponentially, especially by the enormous research works of the Independent Commission of Experts (ICE), which was granted a special privilege to access documents by special legislation. These achievements demonstrated how multinationals from the neutral Switzerland managed to keep their business in both camps during the war.

However, the works on business history by the ICE confined their objects of study to the relations between Nazi Germany and Swiss companies. Therefore, the corporate and management structures of Swiss companies across two camps and markets are yet to be put in full perspective, extent of which shall correspond to the recent research findings on Unilever (Wubs [2008]).

My paper utilizes the documents between the latter half of 1930s and 1940s held by corporate archives of Roche and Nestlé to trace how the companies addressed the risks of nationalism and war, and the shift in center of the global economy from Europe to the USA. The analysis is centered on the double twin structures of the companies. One is the creation of a unique twin-type corporate structure, which features two independent corporations with identical shareholders. The other is the planned or sporadic division of the control functions into two headquarters in the USA and Switzerland to accommodate the division of the world market during the WWII.

These two approaches allowed Roche and Nestlé to continue their operations in both markets of Axis and Allies. At the same time, they fed their way into the Western Hemisphere against the backdrop of the war in Europe and the dramatic expansion of the American economy, and thrived in the overseas market to consolidate a foothold as global players in the postwar period.

The security concern was pervasive not only during the war but also in the postwar period. The two companies maintained the above-mentioned corporate structure and the complex ownership and governance until the end of the Cold War. Therefore, the cases of Roche and Nestlé show that the experience of the war in their home market brought about the historically more decentralized management structure and less transparent corporate governance of the European multinationals, compared to the American big businesses.

 
 
The Business History Seminar has been made possible by financial support from the Erasmus Research Institute of Management (ERIM) and the Vereniging Trustfonds Erasmus Universiteit Rotterdam.
 
Contact information:
Abe de Jong Ben Wubs
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