Why Are Multinationals More Productive than Non-multinationals? Evidence from Canada

Multinationals play an important role in the world economy because they are larger, innovate more, are more productive and pay higher wages compared with non-multinationals. Multinationals (i.e., firms that have established affiliates or subsidiaries in other countries) have played an increasingly important role in many economies. In Canada, multinationals accounted for only 0.8% of all enterprises in 2016, but they held 67% of all assets in the Canadian economy (Schaffter and Fortier-Labonté 2019). Given the importance of multinationals to the Canadian economy, it is essential for policy makers to understand the economic performance and productivity advantage of multinationals operating in Canada.

To address policy-relevant research questions, a rich micro dataset covering all industries from 2000 to 2014 has been constructed for this study, using several administrative microdata files at Statistics Canada. This dataset is used to delve deeper into and estimate the productivity advantage of multinationals, including the selection and learning effects associated with multinationality. In addition, this study investigates whether and how research and development (R&D) investment contributes to the superior productivity performance of multinationals.