Firm Structure, Multinationals, and Manufacturing Term Paper

Data Analysis

We define a plant to have died if it is in the LRD in year t but absent from the Census in year t _ 5 and beyond" the authors state, in explaining the parameters of their research (Bernard & Jensen 2007, p.196). The authors of the study did not include plants with fewer than ten workers, and any industry whose products are categorized as not elsewhere classified leaving 236,000+plants to be studied. The plant's heterogeneity, balance of capital between foreign and domestic assets, skill level of workers, industry and geography were all classified and examined as variables in the research (Bernard & Jensen 2007, p.197). They found that, ownership by a U.S. multinational, or a recent ownership change, were associated with survival. The authors believed they could not conclude that multinational ownership alone conveys benefits to a plant in the form of increased survival and their results may be due to the fact that plants that are part of larger firms as well as are part of multinational groups also have "good" plant characteristics (Bernard & Jensen 2007, p.198). They are more likely to export, employ more capital and more skilled workers, and operate in industries with lower shutdown probabilities (Bernard & Jensen 2007, p.202).

Conclusion

One aspect of the additional support given by a multinational status to a firm that reduces plant death not explored by the article is that not only are multinationals larger, but they also have the luxury of a buffer market against swings in domestic demand -- goods can be shifted to a temporarily healthier economic sphere of the globe, and these firms also have additional access to foreign capital.The authors state that their article addresses a gap in the existing literature regarding plant deaths, and it is certainly important and valuable to explore the role of international status in plant survival. This is true because of the dominance of larger and later multinational enterprises in almost all of the nations of the world. Furthermore, the article has implications beyond the U.S., as if domestic U.S. plants find it difficult to compete with the resources of foreign corporate entities, no doubt this will prove an even greater struggle for enterprises in developing lands. Finally, the authors find that large U.S. multinationals are more willing to close 'bad' plants: "We also find strong evidence that ownership by a U.S. multinational significantly increases the shutdown probability of a domestic plant conditional on plant characteristics" (Bernard & Jensen 2007, p.202). Thus protectionism may not be a viable solution to prevent the encroachment of larger firms into an economy, as one of the signs of success of a firm is its ability to quickly close unproductive plants, and quickly shift capital and production materials elsewhere. Protectionism may simply prop up inefficient firms.

Works Cited

Bernard, Andrew & J. Bradford Jensen "Firm Structure, Multinationals, and Manufacturing Plant Deaths." The Review of Economics and Statistics. 89 (2). 2007. 193-204. Available for download 19 Jun 2007 at http://www.mitpressjournals.org/doi/pdfplus/10.1162/rest.89.2.193

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