Domestic Profit Advantages of Multinational Firms

This study uses confidential corporate data from the U.S. Federal Trade Commission's Line of Business P rogram to test if U.S. multinational firms earn higher rates of profi t on domestic undertakings than do their nonmultinational rivals. Dom estic profits are regressed on various industry and firm characterist ics, including three different measures of "multinationality" that correspond to industry, overall-firm, and firm-by-industry classifica tions. The evidence suggests that multinationals do have profit advan tages when foreign activities are in the same or related lines of bus iness. The effects of foreign trade as a separate influence appear to be much as in previous studies, but with richer interpretations.