The determinants of performance by transnational corporations and single-nation corporations: Implications for the domestic economy

U.S.-based transnational corporations (TNCs) and single-nation corporations (SNCs) are shown to occupy two distinct sectors, core and periphery, in a dual economy. The sectors are differentiated by the competitive regimes characteristic of each. The TNC-core group is located predominantly in the technologically advanced, capital-intensive, rapidly growing industries, and invests more intensively than do SNCs in research and development, advertising and marketing, and new plant and equipment. In addition, the greater ability of TNCs to deploy international and inter-industry capital flows within the firm creates a tendency toward greater and more homogeneous profit and growth rates than is characteristic of SNCs. The empirical work presented here breaks new ground in several ways. The economic rate of return on assets is measured by adjusting the book value of assets to reflect replacement value; total return includes returns to both equity and finance, and is measured net of industry-specific economic depreciation instead of tax-based depreciation. Regression analysis on firm-level data incorporating the effects of international operations is new, since the few studies that have included international data have most often been performed on industry- or line of business-level data. No previous work has specifically tested for the impact of the different competitive regimes characteristic of the two groups on profit performance.