Szemeredi, K; (2015) Essays on Firm Performance and Multinationals. Doctoral thesis , UCL (University College London).

Abstract

The first chapter uses the entry of large corporations into U.S. counties during the 1980s and 1990s to analyse the effect these firms had on local firms’ innovation. We use a difference-in-differences identification strategy based on counties competing for the entry of a large multinational where we take losing bidders as a counterfactual for winning bidders. We find that inventors located in winning counties start citing the patents of these large corporations three times more than inventors located in losing counties. We also find a positive effect on patent production by winning counties, however this seems to be limited to the main technology class of the large corporation. The second chapter looks at how social capital in the form of trust across affiliates within business conglomerates, shapes the hierarchical structure of these business groups, and in turn how these different business group structures associate with firm level performance. With a unique dataset containing detailed information on ownership chains and hierarchical structures, we look deeper into these structures, and their effects on affiliate performance. Our results indicate that higher trust allows for more vertical structures. Moreover, we find that vertical structures are associated with higher firm performance in a business group. The third paper evaluates the effect of multinationalization of a group on its pre-existing members. The analysis shows that performance of firms, measured in terms of sales, improves by 2% if the group they belong to becomes a multinational. The effects materialize progressively over time. I also evaluate two channels through which multinationalization can affect firm performance: cultural diversity and layer of foreign entry within a group. The former does not seem to play a role, whereas the latter has an effect, showing closer levels of entry to the headquarter having a positive impact on firms’ performance.

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