Firm growth in multinational corporate groups

This paper formulates an econometric model of firm growth that explicitly accounts for interdependence of firm growth rates within multinational corporate networks. We apply a recently introduced IV-estimation procedure for peer group effects to directly test for growth spillovers within multinational corporate networks. Using European firm level data, our estimation results indicate negative spillovers within horizontally organized multinational networks, with this effect being most pronounced for corporate groups producing in a larger number of different countries. In contrast, they are positive for vertically organized multinational corporate groups. In the former case, the spillovers lead to more within-network heterogeneity in the firm growth processes and slower average size adjustments. In the latter case, multinational corporate groups as a whole are more stable and, on average, members adjust their size faster. Finally, the robustness analysis demonstrates that the growth spillover effects in purely domestic corporate groups differ from their multinational counterparts and shows that our baseline results are not driven by spurious correlation of individual firm growth rates.