Geography Reference
In-Depth Information
of these multinational firms has powerful and immediate implications for
the US domestic economy in that they have both a decisive role in driving
the knowledge economy evolution of the US, and also generate significant
domestic demand effects due to their export success. Collectively some 60
per cent of their sales, two-thirds of their workforce, three-quarters of their
wage payments and 60 per cent of their assets are accounted for within
the US (MGI 2010a). Domestically, in terms of their demands for input
factors and their payments of factor rewards, in 2007 US multinationals
accounted for 19 per cent of US private sector employment, 25 per cent of
US wages paid, 25 per cent of US profits earned (MGI 2010a). As such,
these global companies are still heavily embedded in the US economy as
well as the global economy, and any benefits they gain from globalization
also directly and indirectly impact positively on the US economy. Indeed,
this last point is very important, in that as well as being key drivers of the
domestic US knowledge-economy due to their out-performing of domestic
firms on many knowledge and technological dimensions, the contribution
of US multinationals to overall US economic growth also benefits of enor-
mous domestic transmission effects. Indeed, these firms account for 90 per
cent of all intermediate inputs sourced by firms within the US. As such,
US multinationals have huge indirect multiplier effects on other domestic
non-multinational US firms (MGI 2010a), amounting to an extra 14 per
cent in terms of their contribution to US GDP (such that their total impact
is 37 per cent) and an extra 9 per cent of US private sector employment
(such that their total impact is 28 per cent).
Not surprisingly, the domestic economic contribution of US multina-
tionals tends to be very much pro-cyclical, with proportionately much
larger positive growth effects than domestic firms during periods of global
expansion, and proportionately greater negative effects during global
recessions (MGI 2010a). This raises questions regarding their likely role
in the US economic recovery during the decade following the Global
Financial Crisis of 2008. Moreover, these issues are made additionally
complicated by the fact that the US, along with other G7 countries, has
also declined in certain aspects of its attractiveness as an investment loca-
tion (MGI 2010a). In particular, the US has slipped significantly in terms
of global institutional and infrastructure rankings: whereas in 2000 36
per cent of the Fortune 500 companies had their headquarters in the US
and 16 per cent were located outside of the G7 countries, by 2007 these
numbers had fallen to 28 per cent and 33 per cent (MGI 2010a).
Notwithstanding these specific issues in the case of the US, the critical
point here is that US multinationals alone account for one third of all
aggregate US economic growth in the modern era of globalization. The
US is the world's largest economy and the global technological leader,
