Why Are Multinational Firms Mostly American?

A note to the reader: The title of this chapter, taken from the first edition, may seem dated in view of the rapid pace of acquisitions of American enterprises by firms headquartered in various foreign countries — especially in Japan and to a lesser extent in Britain. Sony acquired Columbia Records and then Columbia Pictures. Matsushita bought MCA-Universal, another of Hollywood’s major studios. Bridgestone Tire acquired Firestone Tire. These were the types of transactions that made the front pages of the major newspapers. In the latter part of the 1980s, there were usually more than a thousand of these acquisitions each year; and 30–40 percent of the acquisitions were by firms headquartered in Japan. US firms were continuing to expand their foreign investments, but the rate of growth of these investments was swamped by the investments of foreign firms in the United States. One striking feature was that a very large part of these new foreign investments in the United States involved the acquisition of established US firms; when US firms have gone abroad, in contrast, they often have built new factories on ‘greenfields.’