Arbeitspapier
There's No Place Like Home: The Profitability Gap between Headquarters and their Foreign Subsidiaries
Using a large panel data set for European firms, this paper provides evidence that operations at multinational headquarters are significantly more profitable than perations at their foreign subsidiaries. The effect turns out to be robust and quantitatively large. Our findings suggest that the profitability gap is partly driven by agency costs which arise if value-driving functions are managed by a subsidiary that is geographically separated from the headquarters management. In line with falling communication and travel costs over the last decade, the profitability gap is shown to decline over time. Apart from that, our results indicate that a higher competitiveness of multinational firms in their home markets also contributes to the profitability gap. We discuss various implications of our findings.
- Language
-
Englisch
- Bibliographic citation
-
Series: Munich Discussion Paper ; No. 2009-13
- Classification
-
Wirtschaft
Firm Performance: Size, Diversification, and Scope
Asymmetric and Private Information; Mechanism Design
Multinational Firms; International Business
Business Taxes and Subsidies including sales and value-added (VAT)
- Subject
-
profitability distribution
multinational enterprise
corporate taxes
Multinationales Unternehmen
Auslandsinvestition
Unternehmenszentrale
Tochtergesellschaft
Ausländische Tochtergesellschaft
Rentabilität
Europa
- Event
-
Geistige Schöpfung
- (who)
-
Dischinger, Matthias
Riedel, Nadine
- Event
-
Veröffentlichung
- (who)
-
Ludwig-Maximilians-Universität München, Volkswirtschaftliche Fakultät
- (where)
-
München
- (when)
-
2009
- DOI
-
doi:10.5282/ubm/epub.10976
- Handle
- URN
-
urn:nbn:de:bvb:19-epub-10976-0
- Last update
-
10.03.2025, 11:43 AM CET
Data provider
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ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Dischinger, Matthias
- Riedel, Nadine
- Ludwig-Maximilians-Universität München, Volkswirtschaftliche Fakultät
Time of origin
- 2009
Other Objects (12)
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There's no place like home: the profitability gap between headquarters and their foreign subsidiaries
Disaggregating the headquarters: Implications for overseas R&D subsidiaries' reporting and the subsidiaries' knowledge-sharing patterns
Disaggregating the headquarters: implications for overseas R&D subsidiaries’ reporting and the subsidiaries’ knowledge-sharing patterns
Knowledge transfer of repatriates : a multi-perspective analysis of reverse knowledge transfer from subsidiaries to headquarters
Performance evaluation of foreign subsidiaries
There Is No Techno-Responsibility Gap
The Relationship between Profitability, Innovation and Technology Gap: A Basic Model
Staffing foreign subsidiaries with parent country nationals or host country nationals? Insights from European subsidiaries
Service offshoring subsidiaries - towards a typology
How subsidiaries of multinational corporations drive organizational change : a meta-synthesis of qualitative case studies on gaining initiative approval from corporate headquarters
Is There a Gap in the Gap? Regional Differences in the Gender Pay Gap
Is There a Gap in the Gap? Regional Differences in the Gender Pay Gap
There's no place like home: the profitability gap between headquarters and their foreign subsidiaries
Disaggregating the headquarters: Implications for overseas R&D subsidiaries' reporting and the subsidiaries' knowledge-sharing patterns
Disaggregating the headquarters: implications for overseas R&D subsidiaries’ reporting and the subsidiaries’ knowledge-sharing patterns
Knowledge transfer of repatriates : a multi-perspective analysis of reverse knowledge transfer from subsidiaries to headquarters
Performance evaluation of foreign subsidiaries
There Is No Techno-Responsibility Gap
The Relationship between Profitability, Innovation and Technology Gap: A Basic Model
Staffing foreign subsidiaries with parent country nationals or host country nationals? Insights from European subsidiaries
Service offshoring subsidiaries - towards a typology
How subsidiaries of multinational corporations drive organizational change : a meta-synthesis of qualitative case studies on gaining initiative approval from corporate headquarters
Is There a Gap in the Gap? Regional Differences in the Gender Pay Gap