Disaggregating Multinationality: An Empirical Examination of Aggregation, Adaptation, and Arbitrage Activities by U.S. Multinational Corporations

Using Ghemawat’s AAA framework, we distinguish between different types of activities—aggregation, adaptation, and arbitrage—that firms can pursue when operating abroad and empirically examine the distribution and combinations of these activities by U.S. multinationals. Taking a question-based approach, we develop empirical measures of these activities and then examine their prevalence, their correlates, their association with firm performance, and differences across industries in the population of U.S. multinational corporations (MNCs) from 1989 to 2014. Though only a small proportion of U.S. MNCs actively pursue aggregation, adaptation, and arbitrage together, our results show that this combination is most strongly associated with firm performance, especially in industries with high technological intensity. Overall, our study highlights the need to take the heterogeneity of activities MNCs pursue into account when examining multinationality while also providing one of the first large-scale quantitative examinations of the different combinations of Ghemawat’s three approaches to global value creation.