Abstract
What makes firms invest in foreign countries? In this paper, I show that beyond country- and firm-specific characteristics, experience of executives is crucial to understand multinational enterprises' location choices. Using a dataset on executives and subsidiaries of S&P 1500 firms, I find that hiring an executive having previously worked for a company that had at least one subsidiary in a given country increases the average probability to own subsidiaries in this country by 14 percent after three years. Moreover, I observe a similar effect at the intensive margin and a wage premium for experience in managing multinational activities. A causal interpretation of the results is possible by using movements due to unexpected events as sources of exogenous shocks (e.g., death of incumbent executives) and by exploiting the conferral of Permanent Normal Trade Relations status on China as a quasi-natural experiment. Altogether, the findings suggest that executives develop country-specific knowledge, a valuable asset in the labor market that helps companies intensify their presence abroad.
Published Version
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call