Multinational Enterprises – How important are they for the Danish Economy?

Multinational Enterprises – How important are they for the Danish Economy?

At the core of AmCham Denmark’s policy and advocacy agenda is communicating the important role that multinational enterprises play in the Danish society. In May 2011, Copenhagen Business School (CBS) released a report documenting the importance of multinational enterprises to the Danish Economy. The report was funded by AmCham Denmark and co-authored by CBS Professors Jan Rose Skaksen and Torben Pedersen.

Background
The Danish economy is facing significant challenges, including a shrinking workforce and low growth in labor productivity, which have made Denmark poorer relative to other countries. This report explores the potential for multinational enterprises (both foreign multinationals with subsidiaries in Denmark and Danish multinationals with subsidiaries abroad) to improve these conditions – an area which has been more or less neglected in the Danish debate.

Key Findings
All measures indicate that multinational enterprises play a significant role in the Danish economy. Although Foreign-owned multinationals comprise only 1,2% of Danish companies, they generate more than 18% of private sector jobs as well as nearly 25% of Danish exports. Danish multinationals are also making substantial investments abroad, including over 1,3 million employees, which is nearly equal to the total number of private sector employees in Denmark.

Additionally, numerous studies from a range of countries conclude that multinationals are generally more productive than non-multinationals. Workers with previous experience from multinational firms tend to transfer their know-how to Danish firms, thereby increasing their productivity.

However, there has been an increasing gap between inward and outward foreign direct investments (FDIs). Until 2003 the two were basically identical, but by 2009 the stock of outward FDIs was nearly 50 percent higher than the stock of inward. This gap between inward and outward FDIs is particularly large within the area of manufacturing.

Since foreign owned firms seem to be important for productivity and growth, the gap that has arisen between outward and inward FDIs is worrying. This indicates that Denmark has to reinvent its attractiveness – either by becoming more attractive to manufacturing firms or by becoming more attractive in other industries.