Structural Power in Multinational Investments: A Matching Approach

Abstract

We examine how the structure of multinational investment markets affects the distribution of value between multinational firms and the locations where they invest, seeking to understand in what industries multinational firms capture a large share of the value created by their investments and when most of this value is allocated to stakeholders in the country where the investment takes place. To address concerns about the endogenous relationship between value creation and value distribution, we use a novel approach that conceptualizes international investments as matches between firms investing abroad and governments controlling access to the resources in these locations. We use data from 101,785 international investments between 2013 and 2023 to estimate the firm-government “matches” in 2,203 industry-years and the average distribution of value therein. We then evaluate how the size of the industry, the concentration of the industry on both sides, and the heterogeneity of co-production affect the distribution of value in these different international investment markets.