WORKING PAPER 06-7

Firm Structure, Multinationals, and Manufacturing Plant Deaths

by Andrew B. Bernard, Tuck School of Business at Dartmouth and NBER
and J. Bradford Jensen, Peterson Institute for International Economics

September 2006

J. Bradford Jensen Bernard and Jensen find that plants owned by US multinationals and plants that are part of larger firms are much less likely to shut down than other plants. Several characteristics of these plants are key to reducing the probability of shutdown: These plants are larger, older, more productive, and more likely to export; they employ more capital and more skilled workers; and they operate in industries that are less likely to shut down. Once the authors control for these characteristics, they find that multi-plant firms are actually more likely to close a plant and that ownership by a US multinational significantly increases the shutdown probability of a domestic plant.

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