US Multinational Corporations Research Articles

Trade War Between US and China

This paper examines the US-China trade war (2018-2019) and its multifaceted impact on globalization. It explores the causes of the conflict, including China's alleged unfair trade practices and the US trade deficit. The research analyzes the war's consequences on both nations, encompassing economic disruptions, job losses, and agricultural decline. Additionally, the paper investigates the impact on other countries, with some benefiting from trade diversion while others facing economic strain. Finally, the involvement of US multinational corporations (MNCs) is explored, considering their potential support for some trade war goals while opposing increased tariffs that burden their operations. Keywords: US-China Trade War, Globalization, Trade Tariffs, Unfair Trade Practices, Trade Deficit, Economic Disruptions, Job Losses, Agricultural Decline, Trade Diversion, Multinational Corporations (MNCs)

Achieving internal legitimacy and job satisfaction in UK and US multinational corporation subsidiaries in Nigeria: Do acculturation strategies matter?

The ever-increasing organizations’ quest for multinational investments despite cross-border tensions and cultural diversity in the international business environment necessitates acculturation research. This research aims to determine the nature of acculturation strategies adopted among local workers in UK and US MNCs’ subsidiaries in Nigeria and how the acculturation strategies relate to internal legitimacy and job satisfaction among the workers. Utilizing a quantitative research design, the study uses a structured questionnaire to draw data from 454 Nigerians working in UK and US multinational corporations’ subsidiaries in Nigeria. The research finds that Nigerian workers in UK and US MNCs’ subsidiaries in Nigeria predominantly adopt the integrated acculturation strategy. The study further finds that the integration strategy significantly results in internal legitimacy and job satisfaction among the local workers. Contrary to expectations, assimilation, separation, and marginalization acculturation strategies insignificantly relate to internal legitimacy and job satisfaction. We highlighted the acculturation strategy the UK and US MNC subsidiaries in Nigeria can use to achieve internal legitimacy and job satisfaction among local employees.

A new side of deglobalization: Why did US multinational corporations deconsolidate their subsidiaries from Venezuela?

This study explored the deconsolidation of Venezuelan subsidiaries by 15 U.S. Multinational Corporations (MNCs) during the severe economic and political crisis of 2015. We used a probit model and decision tree classifier to examine how foreign exchange losses and the industry sector influenced this decision. We found that consumer goods MNCs and those with large losses were more likely to be deconsolidated. Deconsolidation may be a common response in other troubled emerging markets, especially in a deglobalized world. We contend that deconsolidation improves stakeholder quality and the transparency of financial reporting. In addition, an MNC’s subsidiary deconsolidation is the middle ground between doing nothing and divesting. This study fills a gap in the academic literature on deconsolidation that has been largely overlooked in the past. This raises new questions and challenges for scholars seeking to promote financial reporting transparency in a changing global environment.

U.S. multinational corporations' income shifting incentives and share repurchases: Evidence across differential taxation systems

This study examines the association between income-shifting incentives and share repurchases using a sample of US multinational corporations (MNCs) from 2006 to 2020. We find a significant negative (positive) association between income shifting and share repurchases before (after) the enactment of the Tax Cuts and Jobs Act (TCJA) in 2018. The results show that the TCJA only had a short-term effect on the relation between income shifting and share repurchases that was largely confined to 2018 and reverted to pre-TCJA levels in subsequent years. Additionally, the overall negative relationship between income shifting and share repurchases is stronger in firms with high repatriation costs. However, firms with an advance pricing agreement with the Internal Revenue Service evidence a positive association between income shifting and share repurchases. Overall, we provide evidence for the effects of taxation system reforms on MNCs' income-shifting incentives and share repurchase decisions.

Income-shifting arrangements of US multinational corporations and future stock price crash risk

PurposeThis study examines the importance of income income-shifting arrangements of US multinational corporations (MNCs) on future stock price crash risk.Design/methodology/approachThis study employs a sample of 7,641 corporation-year observations over the 2005–2017 period and uses ordinary least squares regression analysis.FindingsThe authors find that the income-shifting arrangements of MNCs are positively and significantly associated with stock price crash risk after controlling for corporate tax avoidance and other known determinants of stock price crash risk in the regression model. This result is robust to alternative measures of stock price crash risk and income-shifting, and several endogeneity tests. The authors also observe that income-shifting arrangements increase stock price crash risk both directly and indirectly through the information opacity channel. Finally, in cross-sectional analyses, the authors find that the positive association between income-shifting and stock price crash risk is more pronounced for MNCs that use tax haven subsidiaries and have weak corporate governance mechanisms.Originality/valueThe authors provide new empirical evidence that MNCs will likely face significant capital market consequences regarding their income-shifting arrangements.

CyVerse: Cyberinfrastructure for open science.

CyVerse, the largest publicly-funded open-source research cyberinfrastructure for life sciences, has played a crucial role in advancing data-driven research since the 2010s. As the technology landscape evolved with the emergence of cloud computing platforms, machine learning and artificial intelligence (AI) applications, CyVerse has enabled access by providing interfaces, Software as a Service (SaaS), and cloud-native Infrastructure as Code (IaC) to leverage new technologies. CyVerse services enable researchers to integrate institutional and private computational resources, custom software, perform analyses, and publish data in accordance with open science principles. Over the past 13 years, CyVerse has registered more than 124,000 verified accounts from 160 countries and was used for over 1,600 peer-reviewed publications. Since 2011, 45,000 students and researchers have been trained to use CyVerse. The platform has been replicated and deployed in three countries outside the US, with additional private deployments on commercial clouds for US government agencies and multinational corporations. In this manuscript, we present a strategic blueprint for creating and managing SaaS cyberinfrastructure and IaC as free and open-source software.

Equity ownership structure and internationalization of firms: the role of international experience of board chairs

PurposeThis study aims to investigate the impact of equity ownership structure (i.e. CEO ownership, board chair ownership and institutional ownership) on internationalization of firms. The moderating role of international experience of board chairs is also examined.Design/methodology/approachThis study uses Compustat-Capital IQ data from Standard &Poor’s. The sample of this study includes 309 US multinational corporations representing different sectors. The parameters were estimated by using the ordinary least squares regression with the SPSS statistical package.FindingsThe finding of this study suggests that CEO ownership and board chair ownership have a significant, positive impact on the degree of internationalization of firms, whereas institutional ownership has a negative impact. The predicted moderating role of international experience of board chairs has found mixed results.Originality/valueThis study contributes to the literature by taking a holistic approach to examine the impact of equity ownership types (i.e. CEO ownership, board chair ownership and institutional ownership) on firms’ degree of internationalization. To the best of the authors’ knowledge, this research is also the first to investigate the impact of independent board chairs’ equity ownership and international experience on internationalization.

IP protection and ownership in cross-border acquisitions

We use the institutional theory to examine the impact of intellectual property protection on US multinational corporations (MNCs) ownership levels of their foreign acquisitions. Based on a sample of 7238 completed international M&A deals made by US MNCs from 1998 to 2017, we found that multinationals protect their intellectual property through more ownership when they are technologically intensive and invest more when IP protection is strong. However, IP protection negatively moderates the need for more ownership for technologically-intensive multinational corporations. Our results are robust to a battery of empirical tests, including a unique instrumental variable approach. This leads us to claim that our results are not merely correlated but are causal.

Diverse knowledge exploration and diffusion in MNCs

AbstractResearch SummaryThis article examines the influence that intra‐firm manufacturing linkages have on knowledge exploration outcomes in foreign subsidiaries. Although it is common to focus on the importance of keeping exploratory units separate from other firm operations to encourage a more diverse range of solutions, I explore the role that strong manufacturing outflows play in encouraging both the search for diverse knowledge and the diffusion of that knowledge across multinational corporation (MNC) operations. Empirical results from a comprehensive panel of US MNCs merged with the Derwent worldwide patent data reveal that foreign exploratory units with strong intra‐firm manufacturing outflows are more likely to include new‐to‐the‐MNC technology domains in their innovations and that these diverse innovations are more likely to diffuse out of units that have strong intra‐firm manufacturing outflows.Managerial SummaryAlthough foreign exploratory units can provide MNCs with opportunities to tap into diverse knowledge clusters to enhance the competitiveness of a firm, many studies report firm biases against new and unfamiliar knowledge that has been generated in foreign operations. This article explores the role that manufacturing linkages play in providing visible signals of local operation competencies to the rest of an MNC, helping to overcome biases against new and unproven technology domains and enabling foreign exploratory units to pursue diverse, local knowledge inputs and specialization for the MNC. The empirical results confirm that foreign exploratory units that manufacture inputs and products for other MNC operations are more likely to use new‐to‐the‐MNC technology domains in their innovations than foreign exploratory units without such linkages.

Political Relations and Intellectual Collaboration: Evidence from the Global Innovation of US Multinational Corporations

Political Relations and Intellectual Collaboration: Evidence from the Global Innovation of US Multinational Corporations

Foreign earnings repatriation: the effect of exchange rate volatility and the risk of expropriation

PurposeThis study aims to investigate the impact of exchange rate volatility and the risk of expropriation on the decision to repatriate foreign earnings.Design/methodology/approachThe current study uses secondary data for foreign subsidiaries of US multinational corporations (MNCs) in 40 countries from 2004 to 2016. We use the dynamic panel difference generalised method of moments (GMM) to estimate the dynamic earnings repatriation model.FindingsThe findings show that foreign subsidiaries of US MNCs in countries with volatile exchange rates tend to repatriate more earnings to the parent company. The findings also reveal that a greater risk of expropriation in the host country leads to the higher repatriation of foreign earnings to the parent company. The findings support the notion that MNCs use the earnings repatriation policy as a means of mitigating risks arising in the host country.Practical implicationsPractical implications for modern managers include shedding light on how financial managers can use earnings repatriation policy to mitigate exchange rate risk and the risk of expropriation in the host country. The findings also contain policy implications at the host country level that how exchange rate volatility and risk of expropriation can reduce foreign investment in the host country.Originality/valueThis study adds to the earnings repatriation literature by analysing the direct effect of exchange rate volatility on earnings repatriation decisions, as opposed to the impact of the exchange rate itself, as suggested by previous research. Hence, the findings broaden our understanding of the direct influence of exchange rate volatility on the decision to repatriate foreign earnings. The present study also examines the role of the risk of expropriation in determining earnings repatriation policy, which has received little attention in prior empirical studies.

In the Middle: American Multinationals in China and Trade War Politics

AbstractWhich factors make some American multinational corporations (MNCs) take political action in response to the US–China Trade War and cause others to stay on the sidelines? We identify China-based subsidiaries of US firms to identify firms’ political actions in response to the trade war. We combine data on firms’ tariff exposure, economic actions in China, and political actions in the United States during the trade war. Together these data highlight the divergent strategies with which firms engage. Even though more than 63 percent of MNCs in our sample were adversely impacted by tariffs, only 22 percent voice opposition and 7 percent exit in response to the trade war. Our analysis reveals that US MNCs in China differ in their business models, ownership structure, experience in China, and size of capital investments. These firm-level factors determine the degree to which US MNCs are embedded in China. This in turn shapes how firms perceive political risk and choose from the menu of options to deal with the trade war. Size and age increase voice while joint-venture status decreases it.

Effective Leadership Differs Between Organizations: A Comparative Study of US and German Multinational Corporations in South Korea

Effectively implementing leadership is critical for organizational success. In consideration of this issue, this study investigated effective leadership in US- and Germany-based multinational companies (MNCs) operating in South Korea. Drawing on transformational leadership (TL) theory and leadership contingency theory, the study clarified the contextual dependency of TL effectiveness. A survey was administered to 258 employees of the target MNCs, during which the participants were asked to rate their supervisors’ transformational leadership behaviors. The responses were empirically analyzed on the basis of the research framework. The findings showed that a leader’s group-focused TL behaviors indirectly influenced organizational commitment and that this relationship was mediated by psychological empowerment in the US-based MNCs. Conversely, a leader’s individual-focused TL behaviors demonstrated a pronounced effect on organizational commitment and that this association was also mediated by psychological empowerment in the Germany-based MNCs. The leadership behaviors that effectively empowered employees and increased their organizational commitment differed depending on the cultures prevalent in the organizations’ countries of origin. Adopting the two-dimensional model of TL, this study confirmed the contextual dependency of TL behaviors and suggested the need to incorporate an organization’s cultural context into predictions regarding the effects of certain leadership behaviors.

Internationalization and CSR reporting: evidence from US companies and their Polish subsidiaries

PurposeThis study examines the internationalization effects of corporate social responsibility (CSR) reporting, specifically aiming to identify and compare the CSR reporting practices of large US multi-national corporations (MNCs) and their Polish subsidiaries.Design/methodology/approachBased on content analysis and using a disclosure index, the authors examined the CSR information posted on, or linked to, the corporate websites of a sample of 60 US-based MNCs and their subsidiaries operating in Poland.FindingsThe findings indicate that US companies, despite operating in a less regulated environment, had more extensive disclosure than their Polish subsidiaries and covered more CSR-related topics. CSR disclosures within the US subsample were analogous in volume and detail. By contrast, only about half of Polish companies provided CSR disclosures, which were more diverse in volume and in the types of activities disclosed. The authors did not find a significant positive correlation between the CSR disclosures of the two subsamples.Originality/valueThe study contributes to the literature on internationalization processes and sustainability practices. It provides insights into the CSR reporting of companies located in Central and Eastern European countries. The findings also have implications for policymakers in incentivizing the enhancement of the reporting disclosure practices of companies.

Exploring nonlinear linkage between profitability and leverage: US multinational versus domestic corporations

AbstractThis study examines the impact of profitability on the capital structure decision of US multinational and domestic corporations. The findings reveal that the relationship between multinational corporations’ (MNCs') profitability and their leverage ratios is U‐shaped and nonlinear, while this nonlinear relation does not exist for domestic firms (DCs). This nonlinear relationship indicates that the effect of profitability on multinational corporations' leverage depends on the levels of their profitability. Consistent with the dominance of the pecking order theory, lower‐profitability MNCs have a tax shield advantage that does not outweigh the information asymmetry costs of debt financing. Conversely, higher‐profitability MNCs have a tax shield advantage that outweighs the information asymmetry costs of debt financing. The findings are robust after using two different classifications for multinational firms, including foreign tax and foreign sales; after applying an alternative methodology and during different time horizons.

Multinational corporations and tax havens: evidence from country-by-country reporting

A growing body of economics literature shows that multinational corporations (MNCs) shift their profits to tax havens. We contribute to this evidence by comparing a range of available data sets focusing on US MNCs, including country-by-country reporting data, a full sample of which has been released in December 2019 for the first time. With each of the data sets, we analyse the effective tax rates that US MNCs face in each country and the amount of profits they report. Using country-by-country reporting data, we have been able to establish that lower effective corporate tax rates are associated with higher levels of reported profits when compared with different indicators of real economic activity. This corresponds to the notion that MNCs often shift profits to countries with low effective tax rates—without also shifting substantive economic activity. Consequently, we identify the most important tax havens for US MNCs as countries with both low effective tax rates and high profits misaligned with economic activity.

МІСЦЕ ТА РОЛЬ АМЕРИКАНСЬКИХ ТНК У СВІТОВІЙ ЕКОНОМІЦІ

As a result of the growing "openness" of national borders to strengthen foreign economic relations, the role of corporate structures becomes more important and has an unprecedented impact on the country's industrial potential and the national economy as a whole. At the present stage of development, the main role in shaping the economic systems of countries is played not by national economies, but by transnational companies. It is through multinational corporations that globalization processes are taking place, which in the future may lead to the emergence of supercorporations through the acquisition or merger of the world's most influential companies. Today, American TNCs are the most powerful companies, covering all sectors of the economy, occupying a leading position in the world economy and world politics. It is TNCs that contribute to the transformation of the world into a single whole, where its individual parts become functionally interdependent, new trends and laws of development emerge. As the world's largest economy in terms of development, the United States has a leading position in the global market. At the same time, being one of the entities operating in the world economy, American transnational corporations significantly influence both the international exchange of goods and services, international capital flows, and the international exchange of knowledge and technologies. In particular, the United States has long been a leader in the global flow of foreign investment. The article analyzes the activities of US multinational corporations, and their place and role in the international arena. The author draws attention to the leading corporations, emphasizing the dominance of American multinational companies that operate successfully in various sectors of the economy. The article presents statistical data of leading multinational corporations, as well as their economic indicators. Various ratings and magazines that publish information on the world's largest multinational corporations are considered. Foreign direct investment as an indicator of the role of US transnational business in the world is studied. The factors of activity of American TNCs that have a negative impact on recipient countries are given.

Corruption, national culture, law and dividend repatriation policy

This study aims to examine the effect of corruption, national culture, and rule of law on the dividend repatriation policy of foreign subsidiaries of US multinational corporations (MNCs) in 51 countries. The findings reveal that foreign subsidiaries of US MNCs repatriate lower dividends from host countries that have a higher rate of corruption. Additionally, findings suggest that foreign subsidiaries of US MNCs repatriate higher dividends from individualistic countries. Further, weak legal protection in the host country leads to higher dividend repatriation. Moreover, given an effective legal system in a host country, foreign subsidiaries of US MNCs with higher growth opportunities repatriate lower dividends. Finally, this study finds that foreign subsidiaries of US MNCs functioning in countries with a higher rate of corruption, individualistic culture, and the strict rule of law adjust faster towards optimal dividend repatriation policy. The findings are robust to alternative estimation methods and measures.

The US Unanticipated Costs of Decoupling from China

AbstractThe decoupling policies enforced by the Trump Administration aim to break the US economic relationship with China. Those policies, however, are escalating strategic costs for the US in at least three unanticipated ways: the decoupling policies are losing the endorsement of US multinational corporations, undermining the solidarity of the US and its allies, and making supply chains more likely to disengage from the US than to disengage from China. We argue that the ongoing decoupling policies are costing more than the US can bear and will end in vain. If the Trump Administration enforces further decoupling policies without considering those implicit costs, it will only set the US up for a more expensive failure.

The effect of income shifting on the implied cost of equity capital: evidence from US multinational corporations

This study examines the effect of income shifting on the implied cost of equity capital (ICOE) for US multinational corporations (MNCs). We find that income shifting is significantly positively associated with the ICOE after controlling for corporate tax avoidance and other determinants of the ICOE. On average, a one-standard deviation increase in income shifting is associated with an increase in the ICOE of around 0.37%. Our main results are robust to additional tests of risk-pricing and endogeneity. Furthermore, the association between income shifting and the ICOE is more pronounced for MNCs operating in low-quality information environments and where corporate governance monitoring is inadequate. Overall, our results show that the capital market perceives the income shifting of MNCs as a significantly risky undertaking.