Working Paper: NBER ID: w9252
Authors: Susan Feinberg; Gordon Phillips
Abstract: We study the resource allocation decisions of U.S. multinational corporations (MNCs). We examine how established MNCs grow across countries and how firm-specific resources and host country financial-market development influence MNC growth. We find evidence of intra-firm trade-offs to growth in MNCs that have limited organizational capital and high R&D, and MNCs with low external and internal financing. In countries with less developed capital markets, we find significant within-MNC trade-offs to growth between affiliates and their U.S. parents. These trade-offs diminish over time as local capital markets develop. Our evidence indicates that access to financing and organizational capital are important resources for MNC affiliate growth.
Keywords: No keywords provided
JEL Codes: F1; G3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| MNC growth (F23) | affiliate efficiency (D61) |
| affiliate efficiency (D61) | MNC affiliate growth (F23) |
| demand growth in local market (O49) | MNC affiliate growth (F23) |
| relative efficiency of affiliates (F12) | resource allocation decisions (G11) |
| local capital markets development (O16) | diminishing trade-offs to growth (O49) |
| access to financing (O16) | MNC affiliate growth (F23) |
| organizational capital (D29) | MNC affiliate growth (F23) |
| reliance on parent financing (G51) | affiliate growth constraints in less developed financial markets (G19) |
| financial market development (O16) | MNC affiliate growth dynamics (F23) |