Over a very long period (1895-1995) foreign subsidiaries in Denmark are found to have a lower survival frequency than domestically owned companies. The difference is highly significant and robust to control for size and industry effects. Since the number and asset stock of foreign subsidiaries has increased enormously throughout the period, lower relative survival rates are probably not an indicator of performance failure for the viewpoint of the parent companies, but rather a reflection of differences in corporate governance and objectives. In particular, the survival preferences of managers and other domestic stakeholder are probably less influential in foreign subsidiaries, especially in small countries of limited strategic importance. Nor do low survival rates necessarily reflect inferior performance from a social viewpoint, although stakeholder welfare may be negatively affected by exit. But the findings do support a balanced view of foreign subsidiaries as a distinct mode of organization to which there are costs as well as benefits. Since the optimal division of labour between foreign and domestic ownership is likely to depend on a number of complex firm specific factors, political intervention to attract or prevent international ownership may well end up doing more harm than good.
Keywords: Survival, Foreign subsidiaries, Domestic companies
Does it matter whether a company is owned by a foreign multinational? What is the relative performance of domestic companies vs. foreign subsidiaries? Is there a long term upwards trend in the ratio of activities in foreign subsidiaries compared to domestic companies? Does the recent surge in foreign direct investment reflect superior survival power of multinational corporations?
This paper aims to address these fundamental questions by examining survival frequencies of foreign subsidiaries operating in Denmark which are compared to domestic companies over a long period of time - the 100 year period 1985-1995.
Survival is interesting in this connection because it is an indicator of efficiency and economic performance. To be sure, survival is not the only interesting measure, and to some (e.g. Schumpeter 1944) company "deaths" are an essential to the efficiency of capitalism. Nevertheless, survival time is one measure of performance to the extent that a company which survives over a 100 year period may be said to have demonstrated a higher level of efficiency than one which exited after a only a few years. And the relative importance of survival measures is increased by measurement problems associated with other performance indicators. For example the accounting profitability of a subsidiary may be artificially manipulated by transfer prices in internal transactions with the parent company, and stock market returns are generally unavailable. Partly for this reason a number of recent international business studies (e.g. Shaver 1995, 1998, Li 1995, Shaver et al. 1997, 1998) have used survival as a measure of performance for foreign direct investments.
Nevertheless, survival is clearly a particular indicator of economic performance which is more likely to capture some performance dimensions than others. For example, survival is probably a better proxy for stakeholder value (jobs, consumer surplus, taxation revenue etc.) than for financial success.
Even apart from the question of performance, survival times may be indicators of differences in objectives and behaviour between foreign and domestically owned companies. Could the corporate governance of domestic companies be systematically different from that of foreign companies? This will be the central perspective of the present paper. Corporate governance research has demonstrated large differences in ownership and board structures, management practices and philosophies in different countries. It would perhaps not be unreasonable to expect these fundamental differences to be to some extent reflected in differences in economic behaviour and performance between foreign subsidiaries and domestic companies. In particular, Danish corporate governance is closer continental European/German stakeholder oriented tradition than to the shareholder oriented Anglo-American systems. In addition, it seems plausible that even companies originating in stakeholder-oriented system will take more heed of stakeholder interests in their home country compared to the host country and adopt a relatively instrumental view of subsidiaries in small economy on the periphery of continental Europe.
Furthermore, according to the modern theory of the firm there are fundamental differences between companies that operate as subsidiaries (in a hierarchy, owned by a parent company) and an independent company which transacts with others on market terms. In particular, an independent company retains the residual rights of control (Hart 1996) while control in the subsidiary is allocated to the parent company. The residual control rights could very well confer a greater degree of flexibility on the operations of an independent company while the subsidiary may according to the theory of the Multinational Corporation (Caves 1996) have privileged access to specialized resources.
The focus on Danish data is a function of data availability. A fairly comprehensive register of companies operating in Denmark (Greens, various years) has been published since 1887 which provides unique opportunities for longitudinal study. Furthermore, the present study can draw on previous research on life cycles and dynamics of domestically owned Danish companies. Although the findings may have more general implications it also seems possible that Denmark is a special case, perhaps more representatives of other small open economies than of large nations in which multinational companies perceive to have a strategic interest.
The long time horizon of the data base (a 100 year period) is a unique feature of the present study since survival rates are likely to vary across periods of time as a consequence of historical events, business cycles, political regimes etc. The present database provides an overall picture of differences which are sufficiently robust to cut across such shifts. But the length of the time period also comes at a cost: while the database is comprehensive to the extent that it covers all foreign subsidiaries in the register, the company register does not include all foreign subsidiaries. Moreover, the database covers only Danish manufacturing companies and subsidiaries of manufacturing parent companies in Denmark. The exact activities of the subsidiaries (e..g whether they are production or sales subsidiaries) has in many cases been impossible to trace. The companies are observed not year by year but at approximate ten year intervals (1895, 1907,1915, 1925, 1934, 1946, 1956, 1964, 1975, 1985, 1995). In other words, the time of "death"/exit is generally known only within ten year intervals. And often the type of exit (liquidation, acquisition by another company, relocation..) remains unknown. Therefore, this is one of many cases in which more research is called for.
The findings, however, are interesting. Foreign subsidiaries are found to have a significantly lower survival frequency than domestically owned companies. The difference between the two groups is numerically large and robust to control for size and industry effects. In this sense domestically owned companies outperform foreign subsidiaries. As such the findings provide weak support for the popular notion that foreign owned companies are more likely to be closed down.
However, as already indicated, survival is a problematic indicator of performance. If business activities in Denmark were always more efficiently conducted by Danish-owned companies, why would multinational bother to establish subsidiaries there at all? In principle all business activities could be coordinated by market mechanisms rather than with the MNC. So if that were the case, no foreign subsidiaries would operate in Denmark. The evidence is contrary to that hypothesis: in fact the paper demonstrates a strong upwards trend in the number of foreign subsidiaries in Denmark as well as in the volume of their activities in absolute and relative terms.
So, a more convincing explanation is that there are other differences between foreign subsidiaries and domestically owned companies than the size and industry effects controlled for in this paper. As suggested by the theory review differential survival rates may be caused by differences in corporate governance which may in turn result from differences in international corporate governances, different roles assigned to foreign and domestic subsidiaries, and more general fundamental differences between subsidiaries and independent companies. However, other explanations are possible. For example, sales subsidiaries with less sunk costs and specific investments may be more likely to likely to close down than production subsidiaries. Foreign subsidiaries may generally be more oriented towards sales than production and perhaps even more so in high-wage countries like Denmark .
In any case the findings suggest a division of labour between foreign subsidiaries and domestic companies. Ownership does matter. But since the optimal balance between foreign and domestic ownership is likely to depend on firm specific factors which are difficult for policymakers to assess, the general policy implication is to endorse freedom of contract, institutional pluralism and competition. In contrast the unqualified support for internationalization and transnational activities which is sometimes found in the international business literature appears to be unwarranted. For example it is not clear that policies promoting foreign ownership will increase welfare. Nor is it clear that there will be positive effects of attempts at forcing the opening of the markets for corporate control by regulation and limitations on the freedom of contract such as now appear to pursued by the European Union and many governments around the world. In fact, this paper suggests that such policies could easily do more damage than good.
The rest of the paper is organized as follows. Section 2 considers the theoretical relationship between domestic/foreign ownership and company survival. Section 3 presents the database.
Section 4 presents results. And section 5 concludes.
This section considers the consequences of domestic vs. foreign ownership for company survival from the viewpoint of corporate governance. Alternative perspectives are briefly discussed at the end. The rationale for applying a corporate governance view is that theories
of international operations must essentially rely on a theory of the firm (Graham and Krugman 1995), and the modern theory of the firm essentially views the firm as governance mechanism in the sense of Coase, Arrow, Williamson, Jensen and Meckling Alchian and Demsetz, Holmström and Milgrom and others (for a recent survey see Foss, Lando and Thomsen 1999).
The theory of the firm (e.g. Williamson 1996, Hart 1996) predicts a fundamental difference between operations of subsidiaries (within) the hierarchy and independent ownership units regardless of nationality. All else equal, independent ownership is optimal since independent owners retain the flexibility of the residual rights of control (Hart 1988). But to guard transaction specific investments by another company or to provide optimal incentives for quality assurance it may be optimal to allocate these control rights to a parent company. Similar arguments figure prominently in the international business literature as a rationale for establishment of sales subsidiaries rather than independent distributors (Anderson and Gattignon 1986) and as a rationale for direct ownership by a foreign parent company rather than contractual resource transfers such as licensing etc (Dunning 1981). The survival consequences of this trade off present a theoretical puzzle. Subsidiaries may increase their chances of survival by access to critical resources, but they loose some of their flexibility by subordination to an overall corporate structure. The net effect is difficult to assess.
Moreover, the structure of the principal-agent problem differs by ownership structure, and one central argument for company survival objectives - the job safety of top managers - is weakened by subsidiarity. According to a standard agency perspective (in the sense of Jensen and Meckling 1976, Shleifer and Vishny 1997) managers may be more interested in company survival than in shareholder value maximization because survival preserves their jobs. To be sure, the subsidiary structure replaces the owner-manager agency relationship with a similar relationship between top managers in the parent company and lower level subsidiary managers. But the owner-manager agency relationship will often leave managers with significant discretion because of information asymmetries and free rider problems among a multitude of small investors. In the parent-subsidiary agency relationship, top managers will be more firmly in control than a group of investors (less free rider problems) and better informed about the nature of the business. Therefore, subsidiary managers are likely to be more closely monitored than managers of independent companies which will check their preference for the survival of their individual business unit . When an independent company is closed they key decision makers (company managers) are fired. When a subsidiary is closed the key decision makers (parent company managers) stay on. This leads to the hypothesis that greater priority will be attached to company survival in independent companies.
The degree of parent company control will obviously depend on the balance of power between parents and subsidiaries which has been intensely studied in international business research. In general, a subsidiary is likely to be more influential vis-a- vis the parent company (and therefore less likely to be shut down) if it controls resources that are critical to the overall success of the corporation or if its activities are for some reason perceived to be "strategic". For example. subsidiaries serving large markets or tapping into critical resources areas in host countries are likely to relatively influential whereas the reverse may be expected in small, peripheral economies Representation in large markets like the US or Germany may be considered a strategy necessity, and subsidiaries in such markets are therefore unlikely to hold for smaller economies with few identifiable world class clusters.
The international dimension may also affect the relative survival rates of domestically owned companies and foreign subsidiaries.
It is now well known that there are large international differences in corporate governance (e.g. Charkham 1994, Shleifer and Vishny 1997, Pedersen and Thomsen 1997, Laporta et al. 1998), and that these differences may may influence company goals, behaviour and performance. There is also some evidence that these differences may influence international business activity and subsidiary survival. For example, Hennart finds that Japanese subsidiaries in the US are more likely to survive than similar European ventures which could be a function of Japanese corporate governance (patient capital, long termism). In comparative corporate governance (e..g. de Jong 1995) distinction is made between stakeholder and shareholder based systems with Germany as a prime example of stakeholder orientation and the UK/USA as examples of shareholder oriented systems.
For example, employee representation on (supervisory) company boards is mandatory in Germany, the share market is small relative to the size of the economy, the markets for corporate control are virtually closed (almost no hostile takeovers) , unions are quite strong and government regulation is intensive. While return on investment may be an appropriate characterization of company objectives in shareholder oriented corporations, stakeholder oriented systems may emphasize company survival relatively more since shutting down operations is likely to have a negative effect on employees, customers, creditors and other stakeholders. This leads to the hypothesis that domestically owned companies in stakeholder-based systems will have greater survival preferences than foreign subsidiaries, especially if the subsidiaries are owned by parent companies in shareholder-based systems. In particular Danish corporate governance is much closer to the German than to the Anglo-American model (Thomsen 1998)
Moreover, there may be differential treatment of host and home country business units. For example it is not clear that stakeholder interests in host and home countries are weighted equally. On the contrary, if company strategies are decided at the corporate/home country level, they are likely to more susceptible to home country stakeholder influence than to influence by host country stakeholders. The upshot is that companies may adopt a more instrumental view of foreign subsidiaries which are therefore more likely to be closed down if they do not contribute to shareholder value or survival of the parent company.
Other factors may also influence differential survival rates of domestic companies and foreign subsidiaries.
Company size effects are likely to be important when there is an amount of inertia in the absolute volume of business of individual companies which makes it more unlikely for a large company than for a small company to go bankrupt over a given period of time. This may be the case if large companies have more diversified businesses which are unlikely fail at the same time. Indivisibilities may also be important since large companies may be better able to close parts of their activities, e.g. to close a factory, whereas it may not be feasible for smaller company to operate a factory substantially below its capacity. Positive size effects on company survival are emphasized in an empirical study by Mata et al. (1995).
In case of foreign subdisaries size effects could occur both at the overall parent company level and at the subsidiary level. In general the parent companies of foreign subsiaries in a small nation are likely to be much larger than domestic companies. So if parent company size effects are important, one would expect foreign subsidiaries to have a higher survival frequency. In contrast, compared to the largest domestically owned companies, foreign subsidiaries would be expected to be smaller and therefore to have a lower survival frequency.
Industry effects could also be important .The theory of the multinational enterprise predicts that the frequency of multinational enterprises is likely to be higher for certain activies than others - i.e. industries/ activities which are characterized by ownership, location and internalisation advantages (Dunning 1991). And empirically, multinational subsidiaries do tend to cluster in certain industries which are characterized by economies of scale (Thomsen and Pedersen 1998). Companies in these industries/activities may conceivably have survival rates which differ from those in other industries.
Survival frequencies are said to be higher in Chandlerian industries dominated by economies of scale and scope, first mover and integration advantages (Chandler 1990) whereas they would tend to be lower in the traditional industries where small scale production is still the rule and flexibility is a key to success. Since multinational enterprise has primarily developed in the Chandlerian industries, this leads to the hypothesis that survival rates would tend to be higher in industries with a high frequency of foreign subsidiaries.
In summary, the relative survival rates of foreign subsidiaries are theoretically ambiguous. Strong ownership and internalization advantages, strong effects of parent company size and industry, a large and strategically important host country market and a strong subsidiary bargaining power could result in higher survival frequencies for foreign subsidiaries than for domestically owned companies. In contrast, control and flexibility advantages, managerial preferences, stakeholder influence and differential treatment could produce higher survival frequencies in domestically owned companies.
Given the limited size of the Danish economy, a probably limited bargaining power of Danish subsidiaries vis-a-vis their parent companies and a general stakeholder orientation among domestically owned companies, the paper proposes to test the following hypothesis:
Foreign subsidiaries are likely to have lower survival frequencies than domestically owned companies.
The database is truly long term and longitudinal covering a period of 100 years from 1985-1995. It is based on a Danish company register (Greens Danske Fonds og Aktier) which has been published a regular internals since 1887. The major advantage of this long run perspectives is that censoring problems are minimized, e.g. the data is not limited to the study of survivors up to a given year. However, strictly speaking, the data is left censored in time since no observations were available before 1895. Furthermore, the data is right censored in time since no observations are available after 1995. In other words the data is interval (both right and left) censored.
From other studies it is known that the database is not totally comprehensive but the company register is a main source information, and a unique one in international comparison because of the long time span that is covered. There are a total of 934 companies in the database, of which 399 are domestically owned and 535 are foreign subsidiaries. However, 317 companies (primarily foreign subsidiaries) entered into the 1995 register for the first time and so were deleted from the calculations (since they are survivors by definition). This means that (for some calculations) only 617 companies are included of which 378 are domestically owned and 239 are foreign subsidiaries. Since there are generally more than one observation per company the number of observations was higher (n=2222).
The database covers the 100 largest Danish-owned manufacturing companies (ranked by assets) which are compared to Danish subsidiaries of manufacturing parent companies. The focus on manufacturing is warranted by the advantages of comparison with a Danish reference group and secondly by the fact that the vast majority of all foreign subsidiaries are (and especially were) based manufacturing.
No distinction is made between sales and production subsidiaries since this information is generally not available in the register. The companies are observed at approximate ten year intervals (1895, 1907,1915, 1925, 1934, 1946, 1956, 1964, 1975, 1985, 1995), which means that at most 11 observations per company are available, generally less because few companies survived through the whole period, and many of the companies were founded in the interval. The data can therefore also be regarded as being interval censored over the ten year intervals.
The time of "death"/exit is generally known only within ten year intervals. A company which exited in the period t to t+10 is coded 1 (dummy for the exit event) in period t meaning the company exited in the subsequent period. Furthermore the type of exit (liquidation, acquisition by another company, relocation, liquidation) remains unknown. In other words the exit event is often synonymous with "missing, presumed dead", when the company no longer appears in the register. Although substantial efforts were made to uncover lost companies this does introduce an amount of noise into the material because of irregularities in the register, undetected mergers, name changes etc. Mergers and acquisitions were coded as an exit events except in the cases when the company accounted for the major share of the combined unit. Otherwise the combined unit is regarded as a new entrant in the subsequent period
The database contains information on company age, industry (84 4 digit ISIC codes), share capital, accounting assets and equity of the individual companies as well as the time of observation. A constant price size measure was constructed by inflating accounting assets up to the 1995 price level (using the GDP deflator). In some cases when assets were not available an estimate was made based on linear regression on share capital (the fit was quite good with R-squares in the order of 80%).
To provide an overview figure 1 plots the number of foreign subsidiaries in the database, their combined asset stocks (constant 1995 prices) and the asset stock relative to the assets of the 100 largest domestically owned manufacturing companies.
The graph indicates an explosive increase in the number of subsidiaries and their combined assets. The process has not been steady. There have been two leap periods from 1905-1925 and 1965-1995, whereas the trend stagnated in the interwar period. This is roughly the same pattern that is observed in the trade figures (e.g. exports/GDP). Early on, the database contains almost no foreign subsidiaries (2 in 1895 !!), which is clearly an understatement. However, there is little doubt that the number of foreign subsidiaries and their asset stock increased substantially from 1905 to 1925 and then stagnated during the 1930s and 40s.
The relative asset stock has also increases markedly, especially from 1985-1995, when it was almost doubled But apart from that, the relative rate has been remarkably stable at around 30% since the 1930s. It must be added, however, that the relative ratio is a crude measure of internationalization since the 100 largest manufacturers are are not necessarily representative of manufacturing as a whole nor for that matter of the economy. For example, the asset stock of the domestic companies includes their (growing) foreign operations (which could tend to produce a downwards bias relative to the true trend), and the total number of manufacturing companies has also been growing (which could tend to produce an upwards bias ). On balance, there has probably been a long term trend towards aggregate industrial concentration (Thomsen 1992) so that the present ratio tends to overstate the true level internationalization.
Nevertheless, the figures indicate that foreign subsidiaries are growing in number and in size which indicates that this mode of organization is competitive and relatively efficient, at least in certain sub-segments of the economy. The advantages of internalising the transfer of specific resources provide a standard efficiency rationale.
Given these findings, it would be natural to assume that foreign subsidiaries have survival rates which equal or exceed those of domestically owned companies, but this conjecture is false. Figure 2 plots the survival rates of foreign subsidiaries and domestically owned companies as function of their age.
It turns out that the survival rate for domestically owned companies is larger than for foreign subsidiaries regardless of age (although a few foreign subsidiaries have not yet had the time to exit). The median survival time for domestic companies was 78 years (mean of 90 years) against 55 years (mean of 54 years) for foreign subsidiaries. The difference is highly statistically significant in 3 standard tests of equality between strata (table 1).
In other words, the hypothesis advanced in this paper is strongly supported by the data. Although a sound theoretical argument could be made based on the advantages of internalisation why foreign subsidiaries might outlive domestically owned companies, the opposite appears to be the case. As the number and asset stock for foreign subsidiaries in Denmark has been rapidly increasing since the beginning of the century, it seems improbable that lower survival rates reflect performance failure from the viewpoint of the parent companies. In contrast, they appear to provide some support for fundamental differences in governance and objectives as a function of foreign vs. domestic ownership
Furthermore, the significance of the difference is robust to controls for size and industry effects. The logit estimates in table 2 also estimate the magnitude of the ownership effect.
In table 2, model 1 provides a test of significance in a logistic regression with exit as the dependent variable and ownership (domestically owned, foreign subsidiary) as the independent variable. Logistic regression estimates how the logistic transformation log (p/(1-p)) of the exit probability p is affected by the independent variables.
The impact of ownership structure turns out to be significant with a coefficient of -0,41 for domestic relative to foreign ownership which with an intercept of -1,32 indicates that the probability of exit for a foreign subsidiary in a given 10 year time period is 21%, but only 15% for a domestically owned company. The odds of exit to non exit are 0,21/(1-0,21)=26,7% for a foreign subsidiary and 0,15/(1-0,15)=17% for a domestically owned company. The odds ratio for domestically owned companies is therefore only 66% of the odds ratio for foreign subsidiaries (0.17/0.26=0.66). In other words domestic ownership affects the log odds ratio by a factor ln(0.66)=--0.41 (the coefficient). The log odds ratio for foreign subsidiaries is log (0.26)=-1.32 (the intercept).
The size effect turns out to be negative as might be expected, but controlling for size does not alter the log odds effect significantly. In contrast, controlling for industry effects raises the log odds effect of domestic ownership to -0.70 which indicates that the odds of exit to non-exit for domestic companies are only half of what they are for foreign subsidiaries. Interestingly, controlling for industry appears to increase the differences in survival rates which could indicate that foreign subsidiaries are active in industries with lager than average survival frequencies. However, the industry effects do not come out significant in these estimates.
Summing up, there is little doubt that the exit rate for foreign subsidiaries is higher and the survival rate correspondingly lower than for domestically owned companies. In other words the main hypothesis is supported by the data (cannot be rejected). Alternative estimates with explicit control for interval censoring yield the same results.
Since this finding appears to have important implications for theory and policy it is important to consider the possible sources of bias which could have influenced it.
Industry effects are a cause of concern. In the above calculations, foreign subsidiaries are categorized by the industry of the parent company, although many of them are no doubt sales subsidiaries. In other words, trading companies are in some cases compared to manufacturing companies. Whether this in itself is a source of differential survival rates is more uncertain.
Trading companies may be relatively sheltered from direct import competition and technological shifts which might increase their odds of survival. In contrast, higher sunk costs
and lower marginal costs in manufacturing might provide greater incentive to continue operations. Empirically, previous studies have found that complex and R&D intensive industries have lower survival rates which would point to a higher survival frequency for foreign subsidiaries.
Country effects could also be important. Foreign subsidiaries in a small country with a fragmented industry structure may not be representative of foreign subsidiaries in general.
It seems likely that survival rates for foreign subsidiaries may be higher if they are located in important large markets or are perceived to have some other "strategic" significance. On the other hand, some theoretical arguments (e.g. agency and home country preference) that do not depend on country effects do predict lower survival frequencies for foreign subsidiaries. Further cross national comparisons would be helpful to sort out these effects. Moreover, the present findings could still be representative for small economies which constitute a research field in itself.
Exit modes could also vary as a function of ownership category. And this could influence the results. The present data is not able to distinguish between merger/acquisition and closure except in very crude terms. If foreign subsidiaries are more often sold to other foreign parent companies (as has been the case with gasoline stations) then this might serve to artificially inflate their exit rates.
In conclusion the present study has found that foreign subsidiaries in Denmark had significantly lower survival frequencies than domestically owned companies. The findings appear to be sufficiently robust across time periods, industry and firm size to warrant further research.
Given high entry rates and a growing stock of foreign subsidiaries, lower survival frequencies should probably not be interpreted as a measure of performance failure. A more probable interpretation is that the governance of foreign subsidiaries may differ from that of domestically owned companies. In particular, managerial discretion and stakeholder pressures may be stronger for domestic companies. Nor can a certain home country preference be ruled out. Small country and industry effect may also have contributed to low survival rates in the present study.
While further research is needed to unravel these effects, the present study appears to have important policy and strategy implications.
First of all, foreign ownership is not necessarily all beneficial. Policymakers often attempt to encourage foreign ownership, and these attempts may be misguided, especially if the policy makers are more concerned about company survival than about financial performance.
A more informed view is to regard foreign subsidiaries and domestic companies as distinct modes of economic organization which have particular characteristics and therefore are suited for different activities. For example, if stability of ownership and strategic autonomy is important to economic efficiency in particular companies/industries, the present study indicates that domestic ownership may be an optimal solution. In contrast, foreign subsidiaries may be an efficient way to organize the use and transfer of firm specific resources. Given a level playing ground (freedom of contract, free entry) selection forces and rationale choice may be argued to favour the survival of efficient organizational forms involving a division of labour between the two modes.
In contrast it is not clear that policies promoting (or restricting) foreign ownership will increase welfare. And political attempts to force opening of the markets for corporate control (which are being advocated by the European commission) may even end up doing a great deal of harm. For example the EU´s 5th company law directive proposes restriction on dual class share which according to Rydkvist (1992) is especially prevalent in small countries which may have limited market potential and strategic significance.
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