Firm-Specific Resources, Financial-Market Development and the Growth of U.S. Multinationals
Susan Feinberg, Gordon Phillips
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.