The Performance of Multinational Affiliates versus Domestic Firms

While some authors argue that multinational companies (MNCs) have several firm and location specific advantages over domestic firms, others point to the liability of foreignness as a handicap to MNCs. We argue that while the impact on the ultimate performance of MNC in foreign countries is unclear, the impact on firms affiliated to these MNC should be positive. We also hypothesize that the age of the affiliate is an important moderator for the benefit of affiliation with an MNC. We find that MNC affiliates outperform domestic firms and that the benefit of affiliation decreases with the age of the affiliate