Multinational Corporations and their In uence [613575]

Multinational Corporations and their In
uence
Through Lobbying on Foreign Policy
In Song KimyHelen V. Milnerz
December 2, 2019
Abstract
Multinational corporations (MNCs) play signicant roles in shaping the global economy.
Despite the prevalence of the economic activities of MNCs across the globe, few studies exist that
examine their political in
uence on foreign policy-making. This chapter develops a theoretical
framework for understanding how MNCs' unique positions in the market aect their political
activities. Specically, we argue that MNCs' economic dominance reduces the relative cost
of engaging in political activities, while their large-scale transnational activities increase the
marginal benets of in
uencing policy-making individually. To examine this empirically, we rst
introduce a novel dataset of lobbying in the US encompassing lobbying activities of all public
rms from 1999 to 2019. We then employ the dierence-in-dierences identication strategy
to estimate the eect of MNC status on lobbying. We nd strong evidence for an increase in
lobbying expenditures when rms become multinational. Furthermore, we nd that MNCs tend
to lobby on a more diverse set of foreign policy issues. Our ndings suggest that MNCs are
important political actors whose distinct interests and in
uence should be incorporated into our
understanding of foreign policy-making.
Key words: multinational corporations (MNCs), rms, foreign policy, lobbying
We thank Lukas Wolters and Dominic De Sapio for their excellent research assistance.
yAssociate Professor, Department of Political Science, Massachusetts Institute of Technology, Cambridge, MA,
02139. Email: [anonimizat], URL: http://web.mit.edu/insong/www/
zProfessor, Department of Politics, Princeton University, Princeton NJ 08544. Email: [anonimizat],
URL: https://scholar.princeton.edu/hvmilner/home

1 Introduction
Multinational corporations (MNCs) play signicant roles in shaping the global economy. For exam-
ple, MNCs in the U.S., which has the world's largest economy, make disproportionate contributions
to the national economy: They represent a very small number of total American rms (less than
1%), but a large fraction of GDP, exports, imports, research and development, and private-sector
employee compensation; Specically, U.S. MNC parent companies in 2016 constituted more than
24% of private sector GDP (value-added) and 26% of private-sector employee compensation (Bu-
reau of Economic Analysis 2018a); U.S. MNCs are engaged in more than half of all U.S. exports and
more than 40% of U.S. imports (Bureau of Economic Analysis 2018b). Likewise, MNCs throughout
the world dominate the global economy as well as their national economies. The OECD (2018)
estimates that MNCs account for half of global exports, nearly a third of world GDP (28%), and
about fourth of global employment. These rms all generate a signicant share of their revenue from
abroad as well.1Importantly, their transnational activities have transformed the nature of interna-
tional trade, investments, and technology transfers in the era of globalization. The extensive global
value chains (GVCs) prevalent in today's world economy have been driven by how MNCs structure
their global operations through outsourcing and oshoring activities. In fact, their decisions have
enormous implications for a wide range of policy issues|such as taxation, investment protection,
immigration|across many countries with dierent political and economic institutions. MNCs also
may have strong political in
uence domestically. Indeed, their global economic dominance may go
hand-in-hand with their powerful domestic political position.
Recent political developments bring multinational lobbying eorts into stark relief. Multina-
tional rms have vocally opposed the Trump Administration's escalation of trade tensions, tighten-
ing of immigration restrictions, and disruption of global value chains. Intensive lobbying, however,
does not always equate with political power. While the Trump Administration has largely rebued
MNC's eorts to preserve existing trade agreements, individual rms have lobbied successfully
to win tari exemptions. In other policy domains such corporate taxation and the proposed
Destination-Based Cash Flow Tax, multinationals lobbied on both sides of the issue. Despite the
prevalence of the economic activities of MNCs across the globe, few studies exist that examine
their political in
uence on foreign policy-making.
In this regard, the main contribution of this chapter is to investigate MNCs' distinct roles as
political actors. We focus mostly on the US and on one form of political activity, lobbying. We
try to address several general questions however. First, are MNCs dierent from other rms in
1Manyika et al. (2018) calculated that the top 1% of rms with annual revenue greater than $1 billion dollars
source more than 42% of total sales from outside their home country.
2

their political activities? In particular, do the global connections of these rms lead them to have
distinct policy preferences from domestic rms? Second, do the political activities of MNCs dier
even from those of big domestic rms? Past research notes that big rms are dierent; they have
more political activity generally and usually do so more alone. Are MNCs just global versions of
these big rms? Third, do MNCs care about the same set of issues that all rms, or all big rms,
concentrate on? We address these questions by reviewing much past research and then providing
new empirical analyses.
We begin by pointing out MNCs' unique economic characteristics compared to other rms that
compete primarily in domestic markets. In doing so, we relate our discussion to the theoretical
framework of heterogeneous rms in international economics to describe MNCs' unique positions
in the global economy. Specically, we discuss how MNCs' engagement in international trade and
foreign investment aects their policy preferences. We show that MNCs policy preferences are
likely to dier greatly from those of purely domestic rms on issues related to foreign economic
policy. This implies that these rms will dier from domestic rms, even big ones, in the the issues
they care about most. And it means their positions on many issues will diverge from those of the
much more numerous domestic rms, who will be less likely to organize collectively for political
action. In addition, because of their size, global reach and leading role in the national economy,
they will have more means to aect politics and more reasons to do so.
The second contribution of this chapter is to empirically examine MNCs' political activities
in the US. We introduce a new database of lobbying| LobbyView |to study MNCs' engagement
in lobbying (Kim 2018). This database, based on the lobbying reports led under the Lobbying
Disclosure Act of 1995, provides highly granular data on lobbying that scholars and practitioners
can use to evaluate special interest group politics. We merge this data with a rm-level nance
database to investigate whether MNCs exhibit dierent political activities compared to purely
domestic rms. To estimate the independent eect of the change in a rm's status from domestic to
multinational, we employ a dierence-in-dierences identication strategy. Specically, we compare
the dierence in lobbying expenditure of rms that became multinational against those of domestic
rms that are similar in their size and previous lobbying activities. We nd strong evidence for
an increase in lobbying expenditures when rms become multinational. Furthermore, we nd that
MNCs tend to lobby on a more diverse set of foreign policy issues. To be sure, our study in
this chapter is limited to the US, recent years, and individual rm lobbying activity. However,
our ndings lay an empirical foundation for future research of MNCs' political activities across
various countries, in dierent periods, and their connections to lobbying through larger industry
associations.
3

In sum, MNCs are politically distinct as well as economically. They act politically in ways that
dier from domestic rms, and even from large domestic ones. Our ndings suggest that MNCs are
important political actors whose distinct interests should be incorporated into our understanding
of foreign policy-making. While we cannot fully assess their political in
uence, we do note that
many of the policy positions they alone have championed have become US policy in recent decades
and indeed have helped create the globalized world economy that we live in today.
2 The Political In
uence of Multinational Corporations
This section considers the roles that MNCs play in both economic and political marketplaces. To
begin, we discuss their unique economic characteristics compared to other rms that primarily
serve domestic market and how these dierences will aect MNCs' policy preferences. We then
discuss MNCs' political activities in aecting foreign policy-making that have been documented by
many social scientists.
2.1 Firm-level Heterogeneity and the Policy Preferences of MNCs
A rst step in understanding the political in
uence of multinational corporations (MNCs) is to
dierentiate them from other rms.2In fact, there exists ample empirical evidence that MNCs
dier in a number of important ways from purely domestic rms: they tend to be large and highly
productive (e.g., Bernard, Jensen, and Schott 2009). They also tend to be the largest exporters, the
most integrated into GVCs, employers of the most high skilled workers, and the largest spenders
on R&D (Autor et al. 2017). This gives them a valuable position in any economy.
The uniqueness of MNCs has a close theoretical connection to the studies that examine rm-
level heterogeneity in their engagement in international trade. In earlier work, Bernard, Jensen,
and Lawrence (1995) show that exporters in manufacturing are very dierent than purely domestic
rms.3While exports from the US only account for about 12.2% of GDP, exporting rms overall
play a large role in the US economy. Exporting rms are larger, more productive, more capital
intensive; and they pay higher wages and employ many workers, especially the most productive
ones.4Bernard et al. (2007) point out that this evidence about exporting rms supports the new,
new trade theory and its focus on productivity dierences among rms. As heterogeneous rm
models predict, these rms benet from trade and its liberalization; they tend to grow bigger and
2We dene a MNC as a corporation that owns or controls production of goods or services in at least two countries.
Our denition stems from data availability using Compustat databases (see Section 3.1); other scholars use dierent
denitions, often ones that focus on the percentage of ownership for subsidiaries abroad which they obtain from the
the U.S. Bureau of Economic Analysis (BEA)'s condential databases.
3Almost all MNCs export but not all exporters are MNCs.
4Note that entry into and exit from exporting is frequent. That is, exporting today is no guarantee of success for
the rm in the future.
4

more productive while less productive rms exit the market. That is, a very small number of rms
within an economy dominate export markets and tend to export many dierent goods to many
other markets. Moreover, roughly half of the rms that export also import and thus are probably
part of global value chains (GVCs).
While not all importers or exporters are multinational rms, almost all MNCs export and/or
import (Yeaple 2009), accounting for over 80 percent of US trade (Bernard, Jensen, and Schott
2009). These MNCs sit atop the productivity ladder of all rms, being the largest, most capital and
skill intensive, and the most innovative (Tomiura 2007; Bernard, Jensen, and Schott 2009; Doms
and Jensen 1998; Slaughter 2004). Among MNCs, as theory implies, there exists variation in where
they invest and how much. A \pecking order" arises where only the most productive rms invest
in all types of foreign locations while the least productive rms invest in only the most productive
locations (Yeaple 2009). Although their numbers are small, they have a large presence within any
economy. And because of these characteristics, they have been viewed as powerful actors within
any country where they operate, whether their host or home one (Prakash and Potoski 2007; Luo
2001; Jensen et al. 2012).
A second important step is to identify the preferences of MNCs in terms of foreign policy overall,
and especially economic policies such as trade, foreign investment, immigration, and exchange rates.
To understand if rms have political in
uence, researchers have studied what they want (especially
ex ante) and whether it diers from what other groups want. In International Relations, for
example, a long standing question has been whether business favored war or peace. Indeed, the so
called security preferences of business have been an important issue from Karl Marx's time onward,
and many scholars saw business or capitalism itself as a driver of war and con
ict, especially
colonialism (Cohen 1973; Staley 1935). The claims about the \military-industrial complex" and
its benets from war are part of this tradition. On the other hand, more recent research has cast
mostly doubt on this claim. In particular, Brooks (2005) argues that business rms in the modern
period are strong proponents of peace, not war. Building upon this, a literature now exists on
the capitalist peace, arguing the capitalism and its agents are central to peace among countries
(Gartzke 2007; Kirschner 2007; McDonald 2009).
Others have studied rm-level preferences regarding foreign economic policies, such as trade,
foreign investment, and immigration. In the trade area, it has long been recognized that rms will
have dierent preferences depending on their ties to the international economy. Domestic rms
that face import competition will opt for protectionism, while big exporters and multinationals
will want freer trade (Milner 1988; Gilligan 1997; Kim and Osgood 2019). The preferences for
freer trade at home and abroad are reinforced for multinationals if they are part of global value
5

chains. In more recent work, Jensen, Quinn, and Weymouth (2015) argue that MNCs in GVCs
should not use trade remedies like antidumping as much as domestic rms and that trade disputes
in their sectors should be less. In terms of foreign investment and nancial markets, many of the
same divides are expected. Small domestic banks and rms should care most about protecting the
domestic market and keeping large foreign rms and banks out. Big banks and multinationals,
on the other hand, should press for open capital markets, protection for foreign investments, and
greater capital mobility (Frieden 1991). Recent work also links rms' preferences to immigration.
Peters (2017) argues that rms will press for open migration policies especially if they face strong
international competition and are limited to operating in their home country; once rms can move
production anywhere in the world, their concerns about immigration end and they no longer press
for open immigration policies.
Finally, MNCs are also the main proponents of preferential trade agreements and bilateral
investment treaties, according to numerous studies (Manger 2009; Kim 2015). And MNCs have
been the main advocates of the inclusion of provisions protecting investment and intellectual prop-
erty rights and liberalizing services in preferential trade agreements, as means to gain an edge
over MNCs from other countries, which are excluded from the trade agreements (Baccini 2019;
D ur, Baccini, and Elsig 2014; Rodrik 2018). Baccini, Pinto, and Weymouth (2017) argue that
intra-industry political divisions over preferential trade agreements exist and they show that large
and productive rms engaged in oshore production are the biggest beneciaries and the most
ardent supporters. Some research also suggests that MNCs increasingly prefer to have decisions
made at the supranational level | that is, in international institutions like the WTO and IMF
or at international tribunals like International Centre for Settlement of Investment Disputes |
where they may have even greater in
uence than domestically (Prakash and Hart 1999; Levy and
Prakash 2003). Other studies show that they are the most likely to lobby for national compliance
in WTO Dispute Settlement rulings (Kim and Spilker 2019; Yildirim 2018). Generally, much of
the recent literature sees a large divide between domestic rms and large, global ones in terms of
their foreign economic policy preferences. Firms may also have signicant preferences about more
domestic policies, especially tax, regulatory, and labor ones. Whether preferences regarding these
break down along domestic vs international lines seems less clear. The next question, however,
is whether all rms pursue political in
uence to secure their preferences and then how the battle
among rms and with other groups plays out in the political arena.
2.2 Political In
uence of MNCs
The means of political in
uence that MNCs employ may dier from issue to issue and country to
country. In this regard, scholars as exemplied by Nye (1974) have identied three main channels
6

through which rms may exert their in
uence over foreign policy-making: direct in
uence through
lobbying, indirect in
uence as an instrument of the state, and unintentional in
uence via their
agenda-setting power. First, rms may directly engage in political activities such as lobbying and
campaign contributions to aect policy making or to press political leaders to address their de-
mands. In doing so, they can also work with industry associations and political action committees
to advance their interests. MNCs can leverage their bargaining power by oering both \induce-
ments" or promises of new investment and \deprivations" or threats of withdrawal of investment
(Nye 1974). Grossman and Helpman (1994) in their famous \Protection for Sale" model show
how lobbying activities of interest groups may change trade policy. In addition to direct lobbying,
rms can leverage informal ties to to political leaders that enable them to provide information and
persuasion (Bauer, Pool, and Dexter 1972; Denzau and Munger 1986). While this is inside pressure
(Culpepper 2011), these in
uence attempts can also involve the public. Outside lobbying includes
the use of public communication channels rather than exchanges with political elites, and involves
tactics such as contacting journalists, issuing press releases, establishing public campaigns, and
organizing protest demonstrations (Kollman 1998; De Bruycker and Beyers 2018).
Second, other scholars have argued that MNCs hold an unintended role in foreign policy as
instruments of the state (Gilpin 1975). In this view, governments have used MNCs to further
the national interest by strengthening the eects of sanctions through MNC production networks,
facilitating capital transfers through rms to strengthen monetary policy, or enabling MNC's foreign
aliates to assist in intelligence gathering (Nye 1974, p. 157). Finally, rms can hold considerable
agenda-setting power from their mere presence abroad. Firms' \privileged position" in the view
of governments (Lindblom 1977) assists political leaders' in dening problems, devising policies,
and prioritizing objectives. As Ray (1972, 82) long along noted, \[t]he in
uence of corporations on
American foreign relations stems primarily from their ability to shape the external environment
from which problems, con
icts, and crises grow, and their ability to dene the axiomatic." While
indirect and incidental lobbying are important avenues of in
uence, our empirical analyses below
focus on the rst type of political in
uence, rms' lobbying activities.
The literature on rms' political in
uence points out that the most consistently interesting
explanatory factors of political activity in home countries have been rm size, degree of government
regulation, and the amount of rm or industry sales to the government (Mitchell, Hansen, and
Jepsen 1997; Drope and Hansen 2006). Countering the pressures of other groups that oppose their
interests (so called counter-mobilization) has also been an important reason for in
uence attempts
by rms (Austen-Smith and Wright 1994). The larger the rms, the more they try to exercise
political in
uence (Ansolabehere, de Figueiredo, and Snyder 2003; Hansen, Mitchell, and Drope
7

2004; Drope and Hansen 2006; Bombardini and Trebbi 2012; Naoi and Krauss 2009). The more
rms interact with the government and its regulations, the more political action they seem to
take. These large rms also tend to act on their own and not in coalitions or industry associations
(de Figueiredo and Richter 2014). There remains debate over whether connections or expertise
and information matter more for lobbying. In addition, the target of in
uence attempts has been
studied. Research suggests that rms target supporters and allies of their positions mostly and
some wavering groups in the middle of the political spectrum (Hall and Deardor 2006; Gawande,
Krishna, and Olarreaga 2012). They are less likely to try to convince opponents to change their
positions.
The literature at least for the US shows that business lobbying entails far more funds than do
campaign contributions. Milyo, Primo, and Groseclose (2000) demonstrate that lobbying expen-
ditures at the US federal level are ve times those of campaign contributions to political action
committees. Firms of all sizes may suer from collective action problems that deter political action
which is costly; however, large rms and hence MNCs may be less aected by this problem (Alt
et al. 1996). Firms' political activities may lead to actual policy changes.5Gordon and Hafer
(2005) and Blonigen and Figlio (1998) demonstrate that lobbying by rms can aect national
policies and in
uence on individual legislators. Fisman (2001) and Faccio (2006) also nd that po-
litically connected rms benet economically from these ties, and that larger rms, which are more
likely to be MNCs, are more likely to have such connections. Furthermore, there is additionally
some evidence that rms which lobby become bigger as a result, thus underscoring their successful
in
uence (Huneeus and Kim 2018; Akcigit, Baslandze, and Lotti 2018).
A key nding of the research on business political activity is that large rms lobby the most.
Numerous studies demonstrate that large rms spend the most on direct lobbying (Boies 1989;
Grier, Munger, and Roberts 1994; Ansolabehere, de Figueiredo, and Snyder 2003; Hansen and
Mitchell 2000; Hansen, Mitchell, and Drope 2004; Drope and Hansen 2006; Bombardini and Trebbi
2012; Naoi and Krauss 2009). This arises for several reason. First, these rms have the most
resources. The size of the rm reduces the \two primary costs of lobbying": the initial costs
to establish a lobbying presence and the actual amount spent to in
uence policy (Kerr, Lincoln,
and Mishra 2014; Hafner-Burton, Kousser, and Victor 2015, p. 10). Bigger rms have a greater
capacity to pay the upfront costs of establishing a lobbying presence (Bertrand, Bombardini, and
Trebbi 2014; Kerr, Lincoln, and Mishra 2014; Kerr et al. 2017). Therefore, large rms \select into"
lobbying whereas smaller rms cannot (Blanga-Gubbay, Conconi, and Parenti 2019; Alt et al.
1996).
Moreover, larger rms utilize their resources to actually spend more (Kim 2017; Dellis and
5See Baumgartner et al. (2009) for a debate on this issue.
8

Sondermann 2017; Igan, Mishra, and Tressel 2012) and forge closer ties with politicians (Fisman
2001; Faccio 2006). Because bigger rms have more expendable resources to in
uence politicians
whereas policymakers are resource-poor (Drope and Hansen 2006), these rms hold an advantage.
The biggest rms are also able to leverage considerable informational advantages (e.g., expert and
technical information) which help to reduce uncertainty for policymakers (Helleiner 2011; Lall 2012;
Young 2012).
By shouldering the initial upfront costs and engaging in lobbying, rm lobbying usually begets
more lobbying. Kerr, Lincoln, and Mishra (2014, p. 166) \report a 92% probability that a rm
will lobby in a given year conditional on lobbying in the prior year" (de Figueiredo and Richter
2014). Bigger rms may also hold a rst-mover advantage where regulators become more amicable
to protecting the rm to preserve the reputations of the rm and the bureaucrats. This leads to
\protection without capture" or consistently favorable treatment by regulators (Carpenter 2004).
A second reason for larger rms to be more politically active is because policies are becoming
increasingly granular (e.g., product-specic trade policy), and therefore lobbying becomes a cost-
benet analysis of individual rms. In fact, scholars have consistently found that large rms
and MNCs often choose to lobby alone and lobbying is becoming increasingly \particularistic"
(Mizruchi 2013). Gilligan (1997, p. 455) argued that since rms involved in \intra-industry trade
are monopolists, lobbying essentially becomes a private good" and thus they are willing to lobby
alone and bear the costs. Further, as Johns, Pelc, and Wellhausen (2019, p. 732) demonstrate
growing globalization has led to not \only an overall increase of lobbying but more lobbying by
individual rms rather than through industry associations, thus contributing to what Drutman
(2015) has described as `growing particularism' in corporate lobbying."
To be sure, lobbying through industry associations still serves as an important channel through
which rms exert their political powers. However, there are other reasons why rms might choose
to lobby alone. Large rms are more likely to have in-house lobbying oces which reduces the
importance of trade associations (Vogel (1996) as cited in Walker and Rea (2014, p. 11)). Finally,
lobbying alone can be more eective than a coalition of strange bedfellows with a cacophony of
voices, diluting the overall message (Nelson and Yackee 2012) or a large coalition when the salience
of the issue among policymakers is low (Junk 2019). Following these ndings about the importance
of lobbying by rms themselves, our research focuses on this particular aspect of political activity.
As pointed out above, much of the research on the political activity of business has shown that
big rms are distinct. But are MNCs dierent from big rms in general? Recent work on MNCs
and foreign economic policy shows that these rms are very active and powerful political actors,
maybe even more than big domestic rms. They may have dierent preferences in foreign policy,
9

be more active, and more likely to act on their own. In particular, the new, new trade theory
with its heterogeneous rm models of trade has changed our understanding of trade politics. The
largest, most productive rms within an industry tend to be the main exporters and multinationals
and hence should favor trade and other forms of engagement with the world economy since they
benet hugely from this. Furthermore, these pro-trade rms may have sizable advantages in terms
of political action, both in association with other large rms and on their own. Large global rms
have both greater nancial resources to invest in political in
uence and the scale to make those
investments protable given that political investment has xed costs (Kim and Osgood 2019).
Because of their large benets from trade and their small number, they also may avoid collective
action problems (Gilligan 1997; Kim 2017).
MNCs may have distinct preferences from domestic rms and they may be focused on dierent
issues. Studies also show that large global rms are signicantly more likely to support trade
liberalization and to lobby for it in a variety of countries, including the US, Japan, and Costa
Rica (Ploue 2017; Osgood et al. 2017).6Osgood (2018) points out that the gains from trade are
highly concentrated in a few rms in the US and that these rms have GVCs that are specic
to certain countries or regions. These facts mean that MNCs in the US lobby extensively in
a pro-trade direction and support strongly trade agreements with the specic set of countries
they deal with. These MNCs outweigh and out lobby domestic rms that oppose trade and they
overcome collective action issues because each rm gains greatly from trade and lobbies on dierent
agreements according to their GVC partners. Further, Kim (2017) shows that international rms
lobby individually to reduce trade barriers on highly specic products, again because they anticipate
large gains from such liberalization on their products.
Other research also shows that MNCs have particular preferences in trade that probably shape
their attempts at in
uence. Kim et al. (2019) demonstrate that for many types of rms, the
standard trade policy measures of the past |taris and subsidies| are no longer their most
important concerns; instead, the nature of rms' involvement in global value chains shapes their
preferences so that other policy issues, such as the protection of foreign investments, are most
important for multinational corporations these days. These distinctive preferences and outsized
resources mean that MNCs, even more than big domestic rms, may prefer to be very active and
to operate alone in the political arena. It also suggests that MNCs may be interested in dierent
issues than domestic rms.
6Moreover, the labor force involved in rms may follow the preferences and political actions of their rms, rather
than their industry or union. The heterogeneous impact of globalization on rms in an industry produces hetero-
geneous eects on workers such that those employed in larger and more globally competitive rms will be likely to
support trade and those in small, uncompetitive rms will be more likely to oppose trade (Dancygier and Walter
2015). However, oshoring may complicate this: workers doing oshorable tasks may be especially opposed to trade
if they work at large, globally engaged rms (Rommel and Walter 2018).
10

Foreign multinationals in the US are also involved in political activity. Mitchell, Hansen, and
Jepsen (1997) shows that foreign-owned rms in the US form and join fewer PACs and give smaller
campaign contributions than do similar sized domestic rms. In later work Lee (2018) studies
foreign multinational corporations in the US and concludes exactly the opposite. She shows that
they seem to use their subsidiaries in the US as local political agents who can in
uence the US
government. Using PAC contribution data, she nds that US subsidiaries of foreign rms have a
greater likelihood to sponsor a PAC compared to similarly sized American rms, and to also give
much greater amounts of campaign contributions. These studies also show, however, that foreign
MNCs tend to be large, powerful political contributors in the US.
While our research is more focused on the US, it is very likely that MNCs play similar roles in
other countries and perhaps exert even more in
uence there because of their even greater presence
in smaller economies. There has been a long literature on MNC in
uence in developing countries
which are hosting their investments. The dependency literature, as its name suggests, focused
attention on how MNCs could realize their preferences and obtain better deals with these host
countries because of their bargaining advantages (Biersteker 1978; Moran 1973, 1978; Evans 1979).
Other early research indicated that foreign investors could be at a disadvantage over time and that
they faced an obsolescing bargain where the host country could expropriate them once they had
invested (Vernon 1971, 1980). Much evidence now suggests that the obsolescing bargain is not very
evident and that rms have developed lots of strategies to prevent this from occurring (Hillman,
Zardkoohi, and Bierman 1999; Eden, Lenway, and Schuler 2005; Henisz and Zelner 2005). The
stress more recently has been on how MNCs protect their investments in host countries and what
characteristics of host countries are most propitious for safeguarding them. The business literature
notes how foreign rms can use alliances with domestic partners and host governments to mitigate
risk (Malesky 2008; Eden and Molot 2002; Stopford and Strange 1991; Pinto 2013; Pinto and
Pinto 2008). They can also integrate into global supply chains (Johns and Wellhausen 2016), build
political ties with host-state policy makers (Henisz and Zelner 2005), ally with politically powerful
multilateral institutions (Nose 2014), and threaten and pursue investor-state arbitration using the
global network of bilateral investment treaties (Salacuse 2010; Allee and Peinhardt 2011; Simmons
2014; Johns and Wellhausen 2016).
Another branch of the literature focuses on choices of MNCs about which host country to
invest in. This range of choice is often seen as giving MNCs great leeway to negotiate better deals
with host countries and to in
uence their politics. In particular, the number of veto players in
the government, the degree of private property protection, and the extent of democracy all may
aect whether MNCs can protect their investments and hence whether they invest in the rst place
11

(Jensen 2003; Li and Resnick 2003; Henisz and Williamson 1999; Henisz 2000). First, more veto
players, on the one hand, makes it harder for governments to change policies and thus reduce any
ex post attempts to change the bargain with MNCs. However, more veto players may also mean
more access points for MNCs and make it easier for them, especially in combination with other
foreign and domestic rms, to in
uence policy (Ehrlich 2007, 2008; Pyle 2006; Gillespie 2006).
Second, more democracy and better private property protection, on the one hand, enable MNCs
to be more likely to nd allies in the host country that will help them. On the other, more political
competition and more space for dierent interest groups in vigorous democracies seem to weaken
MNCs and lessen their in
uence (Jensen et al. 2012). Finally, MNCs can call on their home country
government for assistance (Krasner 1978; Lipson 1985; Fisman 2001; Wellhausen 2014; Truex 2014;
Lee 2019; Gertz 2018). When political leaders desire foreign investment, this ability to choose
locations enables MNCs to exercise important in
uence over the host country and its politics. The
conditions that maximize MNC political in
uence are still much debated, however.
In particular, a large number of studies have pointed out how MNCs have shaped the economic
reform process in many developing host countries. They show that MNCs can aect local policy
decisions in host countries by providing information and policy expertise about regulations in
other countries, by lobbing ocials, especially in alliance with local actors, by promising benets
such as more employment and access to new technology, by threatening to cut employment or
withdraw, and by helping leaders to overcome entrenched local interests by oering more revenue
or employment (Li and Reuveny 2003; Rudra 2005; Mosley and Uno 2007; Malesky 2009; Jensen
et al. 2012). Many of these in
uence techniques for host countries are the same as noted for home
countries.
It is also important to note that MNCs may in
uence international institutions as well as
domestic governments; Hanegraa et al. (2015) point out that the most organized domestic interest
groups such as MNCs are also the most potent actors in many international organizations like the
WTO. Indeed some studies claim that MNCs are now more powerful than ever in their in
uence
due to globalization and the capital mobility it creates (Vernon and Spar 1989; Strange 1996; Levy
and Prakash 2003). These studies suggest that MNCs have a plethora of means to exert powerful
in
uences over the countries they choose to operate in. These issues and forms of in
uence are
very important to keep in mind when assessing the power of MNCs. But here our attention is on
their political activity in the US. In some ways this is a hard case for nding MNC in
uence since
the US political system is highly institutionalized and lled with checks and balances.
The past research surveyed above leads us to focus on at least three key issues. First, are there
dierences in the type or level of political activities of MNCs and domestic rms? Second, are any
12

dierences we see in political activity among rms due just to dierences in their size or are they
due to their extent of global ties? Third, do MNCs focus on dierent issues than domestic rms in
their political activity? These questions have been less systematically addressed in previous work.
3 Data
Despite the signicance of MNCs in foreign policy making, quantitative studies of their political
activities have been limited by the absence of direct measures of their economic and political
activities. In this section, we describe two key rm-level variables that we develop for our empirical
analysis in Section 4: 1) multinationality, and 2) lobbying activities.
3.1 Measuring Multinationality
We begin by measuring a rm's status as a multinational. This is key for our empirical analysis as
our goal is to examine whether rms' lobbying activities change after they become multinational.
We dene a MNC as a corporation that owns or controls production of goods or services in at least
one country other than its home country. We develop a binary measure of rms' multinationality
based on the nancial statements of all public rms available through Compustat database.
Following Dyreng et al. (2017), we begin by computing the ratio of a rm's pretax foreign income
to its total pretax income in a given year. In fact, the use of this measure is justied by the section
x210.4-08(h)(1), Income Tax Expense , of the U.S. Securities and Exchange Commission (SEC)
rules, which mandates the disclosure of the components of income as either domestic or foreign.7
Note that this is still a noisy measure of rms' multinationality as some foreign income might be
generated by other activities that are not directly related to the production of goods or services
such as tax avoidance.8
Thus, we further improve the measure by identifying a cuto in the pretax foreign income
to total income ratio such that the resulting binary measure of multinationality approximates
the distribution of some known statistics of multinational rms in the BEA data. Specically, we
compare the distribution of MNCs' sales against the corresponding numbers reported in Faulkender
and Smith (2016), which is one of very few studies that directly measures multinationality based
on the BEA data and calculates the aggregated characteristics of the MNCs using Compustat
dataset. This allows us to directly merge the economic data with the lobbying dataset. We utilize
the numbers that appear in Table 1 of their paper, where the authors report logged sales data
separately for all Compustat rms, MNCs from the BEA data, and Compustat rms that aren't
7The U.S. Securities and Exchange Commission (SEC) denes foreign income as the income generated from
operations outside of the U.S. that is over 5% of the total income.
8Dyreng et al. (2017) proposes six alternative measures of multinationality.
13

Number of Firm−year Observations
0.0 0.2 0.4 0.6 0.8 1.00 500 1000 1500
Pretax Foreign Income / Total IncomeFigure 1: Histogram of Continuous Multinationality Measure : This gure shows the dis-
tribution of the ratio of rms' pretax foreign income to its total pretax income. The vertical red
dotted line corresponds to the cuto (= 0 :02139) that we used to match the mean logged sales of
MNCs reported based on the BEA data in Faulkender and Smith (2016). We code the rm-year
asmultinational if the ratio is above the cuto and domestic otherwise.
in the BEA data (i.e., domestic rms).9This provides a valuable opportunity for us to match the
sales distribution of MNCs in our data that approximates that of the BEA data. We took the mean
sales (logged) among Compustat rms, and then identify a cuto in the continuous measure such
that the mean sales of the rms above the cuto matches exactly the number reported in the paper
based on the direct measure of multinationality. Figure 1 shows the cuto that we identied in
the distribution of pretax foreign income to total income ratio, i.e., 0.02139. Using this cuto, we
dene rm iasmultinational at yeartif its pretax foreign income to total income ratio is above
the cuto and domestic otherwise.
We then carefully check the validity of our measure both quantitatively and qualitatively. First,
we compare the employment size of multinationals that are published by the BEA employment
numbers10against the number computed by our own measure of multinationality. According to
the BEA, MNCs employed 28 ;022;900 workers in the U.S. in 2016. Using the binary measure
of multinationality that we developed, we nd that MNCs employed 27 ;352;666 people, which
matches remarkably well with the ground truth number based on the BEA data. Note that one
9We note two issues. First, the authors claim to report \the natural logarithm of sales" yet they report numbers
of 5000 and more. We suspect these numbers are not logged. Second, they report a total of 39,894 Compustat
observations from 1995 to 2011. The Compustat data over that period, however, includes 172,425 observations. The
authors report using only those observations for which \relevant variables are non-missing." Thus, we try to replicate
their strategy by eliminating observations that have missing data for shareholders' equity ( teq) and long-term debt
(dltt), arriving at the comparable number of 41,265 observations.
10Seehttps://apps.bea.gov/scb/2018/09-september/0918-multinational-enterprises.htm#mnes
14

0−500 501 − 1,000 1,001 − 10,000 10,000 +
Number of EmployeesNumber of Firms
0200 400 600 800 1000All Industries
BEA
Our Measure
0−500 501 − 1,000 1,001 − 10,000 10,000 +
Number of EmployeesNumber of Firms
0100 200 300 400 500Manufacturing Industries
BEA
Our MeasureFigure 2: Comparison of Number of Employees : This gure compares the distribution of
MNCs based on four dierent size categories in terms of the number of employees. The left and
right panel shows the distribution across all industries and manufacturing industries, respectively.
Dark gray bar represents the numbers reported in Barefoot and Mataloni Jr (2011) who used the
BEA data. The light gray bar on the right represents the number of MNCs in each category
computed based on our measure of multinationality. It shows that we reasonably approximate the
true distribution. Note that the BEA data includes both public and private rms while we only
consider public rms using Compustat database.
cannot directly compare the numbers as the BEA data include both private and public companies,
whereas the Compustat data only include public entities.
Second, we perform another validity check by looking at the number of MNCs as reported in
Barefoot and Mataloni Jr (2011) who use the BEA data from 2009 to present some stylized facts
about U.S. MNCs. In particular, in their Table 6 they report the number of MNCs by employment
size. Note again that as they use all of the BEA data, their numbers include both private and
public rms, and thus there will be more rms in the BEA data. Figure 2 compares the numbers
reported in Barefoot and Mataloni Jr (2011) with the proposed measure. As expected, we nd that
there are more multinational rms in the BEA data. However, we nd that the overall distribution
across dierent employment sizes based on our measure resembles that of the BEA data.
Finally, we validate the accuracy of our measure manually. Specically, we took a random
sample of companies in the Compustat data for 2014 and checked whether we accurately code
their multinationality status. Table 1 displays the list of rm names that we randomly sampled. To
ensure the validity of our measure across rms with dierent sizes, we sampled rms based on their
sales. We checked each rm online and veried that our measure indeed captures multinationality.
For example, the Federal National Mortgage Association, also known as Fannie Mae, is a U.S.
government sponsored enterprise that provides mortgage-backed securities, and we accurately code
15

Domestic Multinational
Big companies
Federal National Mortgage Association Primerica Inc
Cracker Barrel Old Country Store Inc Grainger (W.W.) Inc
Saia Inc Outerwall Inc
Heartland Payment Systems Inc II VI Inc
Denbury Resources Inc. Tiany & Co.
Time Warner Cable Inc Cabot Corp
Neiman Marcus Inc PTC Inc
Voya Retirement Insurance and Annuity Co Total System Services Inc.
Steel Dynamics Inc Invacare Corp
MSC Industrial Direct Co Inc. Verizon Communications Inc
Medium companies
Grin Industrial Realty Inc CUI Global Inc
Capitol Federal Financial Inc Royal Gold Inc
Entercom Communications Corp. Powell Industries Inc
Canterbury Park Holding Corp Zynga Inc
Palmetto Bancshares Inc RealNetworks Inc
Martha Stewart Living Omnimedia Inc. FalconStor Software Inc
Empire Resorts Inc RealD Inc
Flagstar Bancorp Inc. Daegis Inc
AtriCure Inc PFSweb Inc
Sequenom Inc Delta Apparel Inc
Small companies
Cellular Biomedicine Group Inc Success Holding Group International Inc
International Barrier Technology Inc BeyondSpring Inc
Notis Global Inc Histogenics Corp
Alpha Network Alliance Ventures Inc EPIRUS Biopharmaceuticals Inc
Ecosphere Technologies Inc Uranium Energy Corp
Viaspace Inc Alimera Sciences Inc
Anterios Inc Brainstorm Cell Therapeutics
Matinas BioPharma Holdings Inc SurePure Inc
XZERES Corp Generex Biotechnology Corp
Innite Group Inc Midway Gold Corp
Table 1: Sample of Companies examined.
it as domestic . On the other hand, Primerica is a marketing company with a 2017 net income of
$300 million, operating mostly in the U.S. and Canada.
Figure 3 shows the distribution of MNCs across various manufacturing industries.11On average,
we nd that 46% of Compustat rms are multinationals. This number is comparable to the one
reported in Dyreng et al. (2017), who nd that about 40% of the same rms in their analysis
are multinationals.12Having dened and identied public rms in the US that are multinational
and dierentiating them from domestic rms, we can now compare the lobbying activities between
MNCs and domestic rms within each industry in Section 4.
3.2 Measuring Lobbying Activities
The Lobbying Disclosure Act of 1995 (amended by the Honest Leadership and Open Government
Act of 2007) requires lobbyists (e.g., K-street lobbying rm) to le quarterly reports on behalf of
11In terms of total sales of all public rms, manufacturing industry accounts for about 37% of total sales (about $
10 trillion) in the U.S. economy as of 2018. Out of this, about half of the sales is from MNCs.
12They nd that the number increases up to 70% in 2012.
16

0100200300400500600700 Multinational
DomesticNumber of Firms
Food
Beverage and TobaccoTextile Mills
Textile Product MillsApparelLeatherWoodPaperPrinting
Petroleum and CoalChemical
Plastics and RubberNonmetallic MineralsPrimary Metal
Fabricated MetalMachinery
Computer and ElectronicsElectrical Equipment
Transportation EquipmentFurniture
MiscellaneousFigure 3: Distribution of MNCs across Manufacturing Industries : This gure displays
the distribution of MNCs across three digits NAICS industries in 2017. On average, 46 percent
ofCompustat rms are multinationals. Note that Chemical industry has the largest number of
rms while it accounts for about 17% of the total sales in manufacturing industry.
their clients (e.g., MNC) describing lobbying activities. In doing so, they should report lobbying
expenses (or their income), lobbied issues (e.g., international trade), and lobbied congressional bills
among others.
We use LobbyView database that parses through the universe of 1 ;111;859 lobbying reports
led from 1999 to 2019 (Kim 2018). The primary benet of using LobbyView is that it provides
unique rm-level IDs linked to the Compustat data. Using the identier, we are able to merge the
lobbying data with Compustat so that we can use the multinationality measure that we developed
in the previous section to examine political activities of MNCs across time. The lobbying reports
also contain detailed information about rms' political activities. There exist a list of 79 issue
categories specied in the Lobbying Disclosure Act of 1995 such as international trade (TRD),
defense (DEF), and immigration (IMM).13For each issue category, lobbying rms are required to
describe lobbying activities on behalf of their clients. For example, Figure 4 shows that Panasonic
Corporation of North America actively engages in lobbying activities aecting various trade
policies such as the Rules of Origin (RoO) in NAFTA.14
13The complete list of Lobbying Issues is available from https://lda.congress.gov/LD/help/default.htm?turl=
Documents%2FAppCodes.htm
14The original report is available from https://soprweb.senate.gov/index.cfm?event=getFilingDetails&lingID=234D3211-
32EA-4C8E-B4EC-01540AEE2036&lingTypeID=51 Note that Panasonic Corporation of North America does not
enter in our empirical analysis below as we focus on public rms in the U.S.
17

Border Adjustment Tax (BAT) – Tax on imports with exemption on exports – Explain negative impact
of BAT on company sales and U.S. employment Oce of the United States Trade Representative Docket
USTR-2017-0006 – Request for Comments on Negotiating Objectives Regarding Modernization of the
North American Free Trade Agreement With Canada and Mexico – Rules of Origin for products man-
ufactured in Canada and Mexico S. 2098, H.R. 4311 – Foreign Investment Risk Review Modernization
Act of 2017 – National Security reviews of foreign investment or technology transfers H.R. 4170 – FARA
(Foreign Agents Registration Act) Reform – Disclosing foreign in
uence requirements.
Figure 4: First Quarter Report by Panasonic Corporation of North America in 2018
4 Empirical Results
In this section, we investigate whether rms tend to increase their lobbying expenses after they
become multinational. We rst compare the dierences between MNCs and domestic rms in
their economic and political activities at a given time. We nd that MNCs are (1) larger and more
productive, (2) spend more on lobbying, and (3) lobby on a more diverse set of issues than domestic
rms. To account for various confounding factors and selection bias in our analysis, we employ the
dierence-in-dierences (DiD) identication strategy. We nd that a rm tends to spend more on
lobbying when it becomes multinational than it only serves the home market.
4.1 Dierences between MNCs and Domestic Firms
Many researchers nd that MNCs dier from domestic rms in terms of their economic activities
(Tomiura 2007; Bernard, Jensen, and Schott 2009; Doms and Jensen 1998; Slaughter 2004). Among
others, MNCs are found to be larger, more productive, and more capital intensive than domestic
rms. We begin our analysis by checking the dierences between MNCs and domestic rms based
on the measure that we developed in Section 3.1.
Figure 5 shows that MNCs are indeed larger and more productive than domestic rms, consis-
tent with the literature. The gure also sheds an important light on our empirical analyses: there
exist sucient overlaps in the size and productivity distributions between MNCs and domestic
rms. This allows us to investigate the independent eect of multinationality on rms' political
activities, while holding other factors that potentially drive rms' preferences towards foreign pol-
icy constant. Indeed, the new, new trade theory predicts that more productive rms are more
likely to engage in exporting and benet from trade liberalization. Figure 5 shows that there exist
highly productive domestic rms that are not multinational. To the extent that they do engage in
international trade (i.e., not all exporters are MNCs), therefore, we can compare the dierences in
political activities between MNCs and domestic rms due to their dierences in multinationality,
while accounting for the fact that they both engage in international trade and are similar in size.
Next, we examine MNCs' lobbying activities. We construct two outcomes variables. First, we
compute the total lobbying expenditure by aggregating all the lobbying expenses across lobbying
18

Density
0 2 4 6 8 10 120.00 0.05 0.10 0.15 0.20 0.25 0.30Multinational
Domestic
Sales (logged)
Density
0 2 4 6 8 100.0 0.1 0.2 0.3 0.4 0.5Multinational
Domestic
Productivity (logged)Figure 5: Overlaps in the Distribution of Sales and Productivity : This gure compares
the distribution of rm size and productivity (measured as value-added per labor) between do-
mestic and multinational rms. It conrms that multinational rms tend to be bigger and more
productivity consistent with the ndings in the literature. It also shows that there exist sucient
overlaps in the two distributions. In our later analysis, we will match on these rm-level character-
istics in order to account for the possibility that these variables confound the relationship between
multinationality and lobbying activities.
reports led on behalf of each rm. Note that there are multiple reports led in a given year
because each lobbying rms (either in-house lobbying department or K-street lobbying rms) must
le quarterly reports. Second, we identify the set of issues, out of the 79 categories, that are
reported to have been lobbied at least once in each report. This allows us to identify the dierences
in lobbying activities between MNCs and domestic rms.
Table 2 summarizes our analysis based on the OLS regression. In this analysis, we consider
all publicly traded rms that have lobbied at least once between 2007 and 2017. Models (1){
(4) use lobbying expenditure, while models (5){(8) consider the number of lobbied issues as the
outcome variable. We nd that MNCs tend to spend more on lobbying and that they lobby on
more issues. To examine the dierences between MNCs and domestic rms within industries (see
Figure 3 for example), we include the North American Industry Classication System (NAICS)
3-digit industry-level xed eects. Our nding suggests that rms dier in their political activities
even when they are in the same industry. This is in contrast to the existing studies of trade politics
that tend to focus primarily on inter-industry dierences (e.g., Hiscox 2002). We also control for
year xed eects to account for the heterogeneity across time. Finally, we include capital size
and the existence of an in-house lobbying department as rm-level controls.15In sum, MNCs are
15We include the existence of in-house lobbying department as a control because organization expenses using
LDA expense reporting method diers from lobbying rm income. See https://lobbyingdisclosure.house.gov/
amended_lda_guide.html for details.
19

Lobbying Expenditure Number of Issues Lobbied
(1) (2) (3) (4) (5) (6) (7) (8)
Multinational 0 :8991:2391:2030:4611:6492:1982:1820:858
(0:061) (0 :074) (0 :074) (0 :067) (0 :072) (0 :094) (0 :095) (0 :077)
Capital 3 :0354:141
(0:063) (0 :072)
In-house 0 :00020:001
(0:00002) (0 :00002)
Constant 11 :53512:31612:15111:1283:7834:4324:4012:838
(0:035) (0 :557) (0 :563) (0 :487) (0 :041) (0 :710) (0 :719) (0 :559)
NAICS3 FE X X X X X X
Year FE X X X X
Observations 14,732 9,385 9,385 9,327 14,732 9,385 9,385 9,327
R20.014 0.107 0.110 0.319 0.034 0.188 0.189 0.498
Adjusted R20.014 0.100 0.101 0.313 0.034 0.181 0.181 0.494
Note:p<0.1;p<0.05;p<0.01
Table 2: Lobbying Expenditure and Number of Issues Lobbied by MNCs: This table
displays estimated eects of MNCs on lobbying expenditures and the number of lobbied issues by
rms in all industries. We nd that MNCs tend to (1) spend more on lobbying and (2) lobby on
more issues than domestic rms, on average.
clearly dierent in their political activity from domestic rms; holding size and industry constant,
they lobby more and do so on more issues.
4.2 Matching Analysis
Although the analysis in the previous section shows that MNCs exhibit dierent lobbying ac-
tivities compared to domestic rms, there are many potential endogeneity problems that prevent
researchers from drawing causal inferences in observational studies, especially when rms are highly
heterogeneous. For example, our focus on the rms that lobbied at least once (i.e., intensive margin)
may introduce a bias if rms have distinct organizational structures that determine the propen-
sity of their lobbying activities (i.e., extensive margin). Others may have distinct trends in their
growth which might be correlated with their economic and political activities (see, Meyer 1995, for
an overview).
In this section, we apply a dierence-in-dierences (DiD) estimator to investigate the causal
eect of multinationality on lobbying behavior. We proceed in three steps. First, we identify a
total of 210 companies whose multinationality status changed between 2007 and 2017. To ensure
that they indeed turned from domestic to multinational, we then carefully investigate each one of
them relying on public information available from the media and online resources. We nd that we
correctly capture the treatment status as well as its timing for most of them using our measurement
strategy described in Section 3.1. For example, we nd that ABM Industries became a MNC in
2014. In fact, the rm made a number of acquisitions around the period, including that of GBM
Support Services Group Limited, a U.K. company. We also nd that Metlife is measured as MNC
since 2010. This rm purchases American Life Insurance Company (ALICO), with operations in
20

Japan and a number of European countries. Similarly, we are able to nd that Autozone became
a MNC when the company opened its rst store in Brazil. Note that a subsidiary, Autozone
de Mexico, opened in 2003.16Note that a majority of these companies became MNCs through
purchases and mergers with multinational or foreign companies.17
Second, for each \treated" rm ithat became a MNC at year t(i.e.,Xit= 1), we nd the set
of all domestic rms that have an identical treatment history only up to year t1, i.e., rms that
remain to be domestic at t. Formally,
Mit=fi0:i06=i;Xi0t= 0;Xi0t0=Xit0for allt0=t1;:::;tLg (1)
whereXitdenotes the MNC status for rm iat yeart. Out of these domestic rms, we nd
the set of ve closest \matched control" rms in the set Mitthat are similar in terms of their
pre-treatment observable characteristics including sales, productivity, employment size, presence
of in-house lobbying department, and number of issues lobbied in years t3 tot1.18We
compute the average Mahalanobis distance measure between the treated observation and each
control observation over time.19Simply put, we nd domestic rms that are comparable to the
rm that turned into a MNC in terms of their economic and political characteristics.
Finally, using these matched control rms, we compute the DiD estimate. Specically, we
compare the dierence in lobbying expenses of the treated multinational rm ibetween year tand
yeart+Fagainst the mean dierence in lobbying expenses during the same period among the
matched control domestic rms. Under the parallel trends assumption, this gives an estimate of
the eect of the rm's turning into a MNC on its lobbying expenditure. We then take the average
of this estimate across all treated rms to gain our average treatment eect estimate. Formally,
our quantity of interest is given by:
^=1
NNX
i=18
<
:(Yi;t+FYi;t1)1
jMitjX
i02Mit
Yi0;t+FYi0;t1
9
=
;(2)
16Other examples include: OneMain Holdings , formerly known as Springleaf Holdings, acquired OneMain Fi-
nancial from Citi; Danaher Corp merged with Beckman Coulter, an American company that also entertains
operations in Japan. In 2012, it also acquires the British company Naveman Wireless; Jefferies Financial Group
(then named Leucadia) merges with Jeeries Group, an American multinational investment bank with operations in
Europe and Asia. In 2015, the company makes an investment in FXCM, a British rm; Delcath Systems obtained
authorization to market and sell one of their products in Europe; MannKind Corp is a pharmaceutical company
that has products in clinical trials in the US and Europe; Boulders Brands purchased Davies Bakery, a British
company; InfuSystem Holdings is a medical devices company that currently sells its products and services in the
US and Canada.
17Based on our measurement strategy, we do not nd any rms reverting back to purely domestic.
18We adjust for past outcomes as we are concerned that past outcomes may aect both the treatment and the
current outcome.
19Formally,1
3P3
`=1q
(Vi;t`Vi0;t`)>1
i;t`(Vi;t`Vi0;t`) where Vit0is the pre-treatment observable co-
variates that we match (such as sales and productivity) and it0is the sample covariance matrix of Vit0.
21

●●●●−0.5 0.00.51.01.5
TimeEstimated Effects of Treatment Over Time
t+0 t+1 t+2 t+3Figure 6: Eects of Multinationality on Lobbying Expenditure : This gure displays the
estimated treatment eects of rm's turning to multinational corporation at time ton its lobbying
expenditure from time ttot+3. We nd an increase in lobbying expenditure over time. We match
rms based on their size, productivity, employment, number of lobbied issues, and the existence of
in-house lobbying department.
We use the bootstrap standard errors developed by Imai, Kim, and Wang (2018) for statistical
inference.
In Figure 6, we present our main nding based on the DiD estimator in equation (2). We nd
that rms increase their lobbying expenditure after they become a MNC. The estimated eects are
positive and become statistically dierent from zero (the horizontal dashed line) two years after
the treatment status change (see t+2 andt+3). The eect size is substantively signicant as well:
we nd that rms increase their expenditure about 50% ( exp(0:4)1) two years after becoming
a multinational.
Furthermore, we investigate the dierences in lobbying activities for a few rms. We nd that
AAR Corp (a rm in the aviation and defense industry) lobbied mostly on DoD appropriations
before it became a MNC, but started lobbying also on State Department appropriations in 2016 af-
ter becoming an MNE in 2014. Danaher lobbied on Title 1 of Senate bill S.2091 (112th Congress),
which deals with tax exemptions for foreign dividends and income in 2012, one year after becoming
an MNE. Sysco Corp (a company producing food products) reports that it lobbied on 2013 Farm
Bill, H.R. 2393 (114th Congress) two years after it became a MNC which would repeal the require-
ment for meat products to be labeled with their country of origin. Similarly, Berkeley W.R.
Corp (an insurance company) starts lobbying the year it becomes an MNC in 2011 on \legislation
related to tax treatment of underwriting and investment prots of foreign-owned insurance compa-
nies." Finally, Pandora Media (a music streaming rm) increased its lobbying expenditure after
22

●●●●0.000.020.040.06
TimeEstimated Effects of Treatment Over Time
t+0 t+1 t+2 t+3
●
●●●−0.2−0.10.00.10.2
TimeEstimated Effects of Treatment Over Time
t+0 t+1 t+2 t+3Figure 7: Eects of Multinationality on the Likelihood to Lobby on Tari and Taxa-
tion Related Issues : This gure displays the estimated treatment eects of rm's turning to
multinational corporation at time ton the likelihood of lobbying regarding Tariff (left panel)
andTaxation (right panel) policies. We nd that multinational rms are more likely to lobby on
tari policies. However, we nd limited evidence for an increase in lobbying activities related to
taxation.
becoming a MNC in 2012. In addition to music licensing, it also began to lobby issues regarding
intellectual property, including online infringement, copyright, and patent litigation. Our ndings
provide strong evidence that multinational play important roles in foreign policy-making.
We conclude this section by investigating whether certain issues are more likely to be lobbied
when rms become MNCs. We rst shed light on the above nding that MNCs tend to lobby
on more issues (see Table 2). Specically, for each rm that changed the status from domestic to
multinational, we check the set of new issues that are lobbied after rms became multinational.
We nd that Energy/Nuclear (ENG), Budget/Appropriations (BUD), Defense (Defense), Health
Issues (HCR), Banking (BAN), and Foreign Relations (FOR) are the top lobbied issues. This is
expected as the policy issues are related to rms' foreign operations.
To be sure, these issues may be as important for domestic rms as for multinationals. Fur-
thermore, there might exist various reasons why certain issues become more/less salient for both
domestic and multinational rms in certain industries across time. Thus, we again rely on the
dierence-in-dierences identication strategy to compare the changes in MNCs' lobbying behav-
ior against the changes of lobbying activities by similar domestic rms in terms of their size,
productivity, and lobbying expenses. To minimize the diculty in distinguishing foreign vs. do-
mestic policy, we focus on two specic policy domains that are comparable with each other with
dierences in their international and domestic focus: (1) taris and (2) taxation. Figure 7 displays
the estimated eects. We nd little evidence for any change in lobbying activities regarding taxa-
tion policies. However, we nd that rms tend to lobby more on tari policies once they became
multinational compared to domestic rms that are similar to them. In fact, Kim (2017) shows
23

that large and productive rms tend to lobby more on trade-related issues; in addition, he nds
that the dierentiated products that they produce tend to have lower tari rates on average. Our
ndings suggest that more attention should be paid to MNCs' political activities and their direct
eects on foreign policy-making.
5 Conclusion
MNCs are economically dierent than other rms, as many economists have now shown. But do
they dier politically? The past research on this topic has been limited for various reasons, one
being lack of systematic data on political activity. Past research points out that MNCs are likely
to have distinct preferences on foreign economic policy. As international actors who benet from
access to a global market, they are likely to be more favorable to policies that foster an open
world economy. Furthermore, they may be more attuned to trying to harmonize regulations across
borders. Reducing all costs for global activities is key for them. Moreover, being larger and more
productive than most domestic rms, they have more means to try to in
uence politics. Studies of
particular countries, rms, sectors, and issues often reveal the strong in
uence of MNCs (Vernon
1971; Strange 1991; Sampson and Sampso 1973; Gere 1983; Manger 2012; Osgood 2017; Kim
2017). But systematic evidence across rms, sectors, and issues has been harder to bring to bear.
Our study here tries to do this using new data. We rst devise a method of identifying rms as
multinational versus domestic. After validating this measure, we use it to show that indeed those
we identify as MNCs have the particular characteristics that economists have noted that MNCs
should possess: they are larger, more productive, and more export-oriented. Then we show that
MNCs spend more on lobbying and lobby across a more diverse set of issues than do domestic
rms. To more closely causally identity this, we also show that when a rm turns multinational
its political activity changes: it becomes more active, lobbying more and over more issues, as
compared to other rms. Past research has shown that big rms are dierent politically, but we
show that MNCs are even distinct from big domestic rms. MNCs are politically dierent, as well
as economically.
There are several important limitations to our study. First, we focus on one form of political
activity only: lobbying. As our review of past research shows, rms have many means of exercising
in
uence. We have touched on but one of many. Informal lobbying and connections, illegal bribery,
threats of exit or promises of new employment, campaign contributions and PACs are all unexplored
here. We assume that all these in
uence strategies are complements. But if they are substitutes,
then our ndings may not approximate the overall activity of MNCs. Second, we focus on individual
rm activity and not trade associations. Past research suggests that this individual activity is most
24

common among MNCs and thus more salient for our research. But more research about MNCs use
of industry-wide collective action would be useful. Finally, we focus on the US alone. But we think
that many of our ndings are likely to carry over to other countries. As we claimed above, the
US case for MNC in
uence may be a hard one to make given the country's well-institutionalized
and very divided government. Other smaller and poorer countries faced with the resources and
capabilities of these large, global rms may be even more vulnerable to their pressures and hence
more likely to generate MNC political activity.
Do MNCs have outsized in
uence over politics? And relative to whom? Domestic rms, the
public and the median voter, or other interest groups? Our data cannot directly answer this critical
question. We can say that they have greater means and seem to use them to exert more in
uence
than other rms, even big domestic ones. But are they more able to convert these means into success
politically? Again our data cannot give a direct answer. But the direction of US foreign economic
policy in the past decades suggests they have been very powerful. The lowering of trade barriers
via the GATT/WTO and various preferential trade agreements, the opening of capital markets and
signing of bilateral investment treaties and economic agreements with investment protections, and
the harmonization of regulations in many areas in preferential trade agreements are all policies that
the US government has pursued actively and ones that MNCs have championed. MNC preferences,
versus those of purely domestic rms, seem to be very congruent with much of recent American
foreign economic policy. Rodrik (2018) claims, for example, that preferential trade agreements are
tools for MNCs: \Trade agreements are shaped largely by rent-seeking, self-interested behavior on
the export side. Rather than rein in protectionists, they empower another set of special interests
and politically well-connected rms, such as international banks, pharmaceutical companies, and
multinational corporations" (as cited in Blanga-Gubbay, Conconi, and Parenti 2019, p. 4). Indeed,
some have claimed that MNCs are ruling the world, as many nations have adopted similar policies
fostering globalization. Also notable is how the Trump administration's policies that have rolled
back America's support for globalization have been met with great concern by many MNCs. Our
research may then reveal one of the mechanisms for the powerful political in
uence of these global
rms over the years.
25

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