How Companies Managed Risk (and Even Benefitted) in World War Internment Camps

 
 
Foreign businesses located in at-war countries are often victims of expropriation. Historian Valeria Giacomin explores how German businesses in the United Kingdom and India mitigated risk and even benefitted when their employees were placed in internment camps during the World Wars.
 
 
by Julia Hanna
An internment camp for German citizens in England. Chronicle/Alamy Stock Photo

Global enterprises that do business in emerging economies face significant political risks—in extreme cases, imprisonment of their civilian employees during wartime.

Harvard-Newcomen Fellow Valeria Giacomin explores how companies from Germany dealt with the incarceration of thousands of their German national employees in India during World War I and World War II in her recent working paper, Countering Political Risk in Colonial India: German Multinationals and the Challenge of Internment (1914–1947).

It’s an international business history story that hasn’t previously been told in great detail, but should be explored, says Giacomin, particularly since internment has long-lasting effects. During their incarceration, the Germans struggled with racial tensions and the companies themselves experienced staffing problems. Yet, they also enjoyed unexpected benefits, including plenty of networking and after-war opportunities for the tight community of German businesspeople in India.

"The business implications of civil internment are uncharted territory"

“The literature to date hasn’t fully examined the effects of internment. The business implications of civil internment are uncharted territory,” says Giacomin, who co-authored the paper with Christina Lubinski, a former Harvard-Newcomen Fellow now at Copenhagen Business School, and the Boston Consulting Group’s Klara Schnitzer.

At the outbreak of the first world war, German assets in India were expropriated under the Trading with the Enemy Act 1914. The British Empire operated internment camps in New Zealand, Hong Kong, Singapore, and India. The largest Indian camp was located at Ahmednagar, about 155 miles east of present-day Mumbai. Prisoners were housed in old stone barracks and newly constructed huts made of corrugated iron.

The researchers examined the corporate archives of three German multinationals that employed the largest number of people interned in India during the two world wars: electrical company Siemens; chemical giant Bayer (later part of IG Farben); and steel producer Krupp.

Managing the internment risk

World War I brought the first wave of civilian internment, creating a turning point for companies and triggering them to develop strategies for dealing with the resulting challenges to their operations.

The researchers found that German companies struggling to maintain long-term survival in India adopted a mix of political risk management strategies:

  • Disguise Some companies used a “cloaking” strategy, altering their organizational structure to camouflage ownership or relocating to neutral countries to avoid asset seizure by enemy governments.
  • Negotiation Some directly negotiated favorable business arrangements with local governments and decision makers.
  • Perseverance Some adopted the approach of resilience, working to develop legitimacy in the geographic area to build a legacy reputation in a promising market.

By early 1917, Ahmednagar held 1,169 civilians, mostly men in their mid-30s. Although the prisoners’ movements were restricted, they were treated fairly well. They were allowed to build tennis courts, for example. Many spent their days learning foreign languages or studying math, theology, or chemistry in the camp library. In the family camp, some women were even allowed to keep servants.

“They had a good time relative to what was happening in other geographies,” says Giacomin. “Eventually, their major problem was boredom. In that sense it created a network effect—they probably had the chance to establish personal relationships and converse about business.”

Giacomin notes that at a time when communication and transportation were still slow and unpredictable, managers working abroad needed to be independent, adept, and flexible. These employees were experienced, valuable assets to their employers.

Internment not only robbed companies of these key employees, it also made it more difficult for companies to recruit and retain workers for their European businesses. “Only [a] few of the old India experts have found their way back here,” lamented German consul Karl Kapp in 1927.

The resourcefulness with which companies dealt with these staffing challenges could be an area of deeper research, Giacomin says, and has ongoing relevance in today’s tight labor market.

The internment experience also fundamentally changed the way Germans were perceived, upending the sense of racial belonging they had enjoyed along with the British in India. Formerly considered part of the white, European elite, war turned Germans into “enemy aliens.”

Twenty-five years later, with the outbreak of World War II, German national employees were once again interned at Ahmednagar, although eventually relocated to Dehra Dun, 124 miles northeast of New Delhi near the Himalayas. As was the case during WWI, conditions were generally favorable, with the exception of a short stint in an interim camp, Deolali, where prisoners went on a hunger strike to protest poor living conditions. At Dehra Dun, however, internees could go hiking and climbing in the nearby mountains for nine hours at a stretch.

Germans who were interned during WWI lobbied on behalf of their countrymen during WWII. Several, for example, penned a letter to Germany’s Foreign Office: “Again, as in 1914 ... German managers, engineers, chemists, and technicians are interned as prisoners of war in Ahmednagar. ...We all want that after the victorious war, patriotic, courageous young Germans go abroad again as commercial pioneers. How can we ever count on precious men to take this risk, if their home country cannot support them in times of need?”

Business networks form

In this sense, the experience created intergenerational ties, supplementing those formed among camp internees. These bonds proved useful to Germans in finding new positions and receiving recommendations, the researchers found, in addition to helping companies build resilience by creating a sense of continuity and solidarity.

“Losing the war didn’t just represent the loss of assets, but also a setback in terms of future ability to operate in these markets,” says Giacomin. “The challenge was to somehow maintain operations and seize opportunities.”

Sometimes, maintaining a toehold in a market was a best-case scenario that ultimately reaped dividends—something today’s managers might want to remember when considering any emerging market where the political situation could change abruptly, Giacomin says. She cites Egypt and Venezuela as two possible examples.

The internment of German employees/nationals in India offers a new way of showing that events as dramatic and disruptive as World Wars I and II can also have nuanced, more granular impacts, observes Giacomin. She suggests examining internment as a management issue in other geographies and time periods to offer a comparative perspective.

“I think we’ve discovered a bit of a niche here,” she says, noting that there could even be parallels to discover in the experiences of present-day refugees. “It would be great to expand this work and connect it to what is happening in the world now.”

Related Reading:

Restoring a Global Economy, 1950–1980
A Manager’s Guide to International Strategy
Managing Political Risk in Global Business: Beiersdorf 1914-1990

What do you think of this research?

Do multinationals do enough risk mitigation around war? Share your insights below.

About the Author

Julia Hanna is Associate Editor of the HBS Alumni Bulletin.

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