There's No Place Like Home: The Profitability Gap between Headquarters and their Foreign Subsidiaries
- Publication Type
- Journal contribution (peer reviewed)
- Authors
- Riedel, Nadine/Dischinger, Matthias / Knoll, Bodo
- Year of publication
- 2014
- Published in
- Journal of Economics and Management Strategy
- Band/Volume
- 23/2
- DOI
- 10.1111/jems.12058
- Page (from - to)
- 369-395
Using data on European firms, this paper provides evidence that an overproportional fraction of multinational group profits accrues with the corporate headquarters. Quantitatively, the estimates suggest that headquarters are by around 25% more profitable than their foreign subsidiaries, whereas this gap tends to decline over time. The effect turns out to be robust against controlling for observed and unobserved heterogeneity between the entities. Analogous (although quantitatively smaller) effects are found for national groups. We discuss various welfare implications of our findings.
Involved institutions
- Economics: Public Economics
- University of Hohenheim
- Institute of Economics
- Faculty of Business, Economics and Social Sciences