Multinationals and firm heterogeneity: a non-parametric test

This paper, dealing with heterogeneity among multinationals, examines the performance differences between and within foreign owned firms and domestic multinationals in Italy. For the empirical analysis a non-parametric approach based on the concept of first order stochastic dominance has been applied. Results indicate a higher level of labour productivity and a higher average wage for foreign owned firms in respect to domestic multinational firms, which dominate in terms of return on sales and leverage. Robust results are found within domestic multinationals, the parent firms investing only in developed countries show a better performance than those investing only in less developed countries and are characterised by lower leverage. With respect to foreign owned firms, the evidence in favour of US owned firms, in respect to European owned firms, is not so clear. Finally, using a linear regression analysis, it is found that domestic multinationals investing both in developed and less developed countries seem to be the more productive firms.