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Unit 27: FDI : Types and Issues

Table 2 : Select Data on U.S. Multinational Companies and on Foreign Firms Notes
Operating in the United States, 2007
(in millions of dollars unless otherwise indicated)

U.S. Multinational Companies
U.S. Affiliates of Foreign
Parent Companies Foreign affiliates Firms

Number of firms 2,270 26,342 10,941
Employment (thousands) 22,003.1 11,737.5 3,397.4
Employee compensation $1,392,180 $475,595 $433,065
Gross product $2,588,811 $1,117,585 $657,558
Total assets $19,964,935 $14,201,291 $12,732,967
Sales $8,614,733 $5,517,143 $3,553,593
Taxes $257,292 $179,922 $57,731
R&D Expenditures N.A. $35,019 $44,158
Source : U.S. Direct Investment Abroad : Operations of U.S. Parent Companies and Their Foreign
Affiliates, Preliminary 2007 Estimates; and Foreign Direct Investment in the United States:
Operations of U.S. Affiliates of Foreign Companies, Preliminary 2007 Estimates. Bureau
of Economic Analysis, 2009.
Foreign firms employed 3.4 million U.S. workers and paid $433 billion in wages and compensation.
In 2007, 40% of the foreign firms’ employment was in the manufacturing sector, more than twice the
share of manufacturing employment in the U.S. economy as a whole. By comparison. U.S. multinational
companies employed over 22 million workers in the U.S. economy and the foreign affiliates of these
U.S. parent companies employed nearly 12 million workers in nearly 30 thousand firms abroad. The
foreign affiliates of U.S. firms had 60% more in the value of their gross product than the affiliates of
foreign firms operating in the United States, had a greater value of assets, higher sales, and paid
three times as much in taxes.
The affiliates of foreign firms spent $205 billion in the United States in 2007 on new plant and
equipment, imported $550 billion in goods and services and exported $228 billion in goods and
services. Since 1980, the total amount of foreign direct investment in the economy has increased
eight-fold and nearly doubled as a share of U.S. gross domestic product (GDP) from 3.4% to 6.4%. It
is important to note, however, that these data do not imply anything in particular about the role
foreign direct investment has played in the rate of growth of U.S. GDP.
Foreign-owned establishments, on average, have far outperformed their U.S.-owned counterparts.
Although foreign-owned firms account for less than 4% of all U.S. manufacturing establishments,
they have had 14% more value added on average and 15% higher value of shipments than other
manufacturers. The average plant size for foreign-owned firms is much larger—five times—than for
U.S. firms, on average, in similar industries. This difference in plant size apparently rises from an
absence of small plants among those that are foreign-owned. As a result of the larger plant scale and
newer plant age, foreign-owned firms have paid wages on average that were 14% higher than all
U.S. manufacturing firms, had 40% higher productivity per worker, and 50% greater output per
worker than the average of comparable U.S.-owned manufacturing plants. Foreign-owned firms also
display higher capital intensity in a larger number of industries than all U.S. establishments.
Differences between foreign-owned firms and all U.S. firms should be viewed with some caution.
First, the two groups of firms are not strictly comparable : the group of foreign-owned firms comprises
a subset of all foreign firms, which includes primarily very large firms; the group of U.S. firms includes
all firms, spanning a broader range of sizes. Secondly, the differences reflect a range of additional
factors, including the prospect that foreign firms which invest in the United States likely are large
firms with proven technologies or techniques they have successfully transferred to the United States.
Small foreign ventures, experimenting with unproven technologies, are unlikely to want the added

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