Although US multinationals include many of biggest companies in the United
States, the full extent of their economic impacts are less well known. MGI seeks
to provide a fuller picture by assessing the contributions of MNCs across the
key metrics of economic performance:
U.S. multinationals represent less than 1 percent of all U.S.
companies, yet they contribute disproportionately to the U.S. economy’s growth
and health in many ways. U.S. multinationals accounted for 23
percent of U.S. private sector GDP (or value added) in 2007. However, they
contributed 31 percent of the growth in real GDP and 41 percent of U.S. gains in
labor productivity since 1990. U.S. multinationals’ outsized contributions to
productivity growth matter greatly because productivity increases have delivered
nearly three-quarters of U.S. real GDP growth since 2000, with the rest coming
from employment gains—the reverse of the situation 30 years ago.
U.S. MNCs also have outsized impact across other metrics.
While their activities create 23 percent of U.S. private sector
value added, they account for larger shares of productivity growth and U.S.
private R&D spending. They pay higher average wages than other U.S.
companies. They account for almost half of the nation’s exports and more than a
third of its imports, resulting in a more favorable trade balance than other
U.S. companies. U.S. multinationals also exert a significant indirect, or
"multiplier," effect on the economy, which magnifies their contributions
further.
Multinational companies’ record on employment growth has been mixed
across sectors and business cycles. They participate
disproportionately in globally competitive sectors (such as manufacturing) that
were hard hit in the 2001 recession, yet they have played a critical role in
fueling the expansions that followed past recessions. Therefore these companies
could potentially play a similar role contributing to growth in the current
recovery and beyond through their continued strong participation in the U.S.
economy.
U.S. multinationals are twice as concentrated in globally
competitive sectors as other U.S. companies. However, many other
U.S. companies confront the same pressures and choices. U.S. multinationals may
provide insights into how other companies, and the economy as a whole, may
respond to increasingly intense global competition.
The global context in which U.S. MNCs compete and invest is
shifting. The United States retains many strengths that make it one
of the most attractive markets for multinational companies’ participation and
investments. But numerous fast-growing emerging markets and some advanced
economies are making huge strides in increasing their attractiveness. The United
States has entered a new era of global competition for multinational activity.
To gain further insights, MGI interviewed senior executives from 26 of the
largest and most well-known U.S. multinationals and examined how they make
investment decisions. Many of the executives interviewed emphasized the need to
ensure they are competing on a level playing field. They believe that current
U.S. policies—particularly in the areas of corporate taxes, limits on the
immigration of skilled workers, and bureaucratic hurdles and
inconsistencies—handicap U.S. companies when competing abroad and in some cases
discourage investment at home. And several executives expressed concern or
doubts about the ability of the United States to compete for corporate
investment and jobs in the future.
However, MGI research does not suggest that corporate decisions turn solely
on particular policies or that there are no challenges to investing in other
countries. Rather, MGI has found that developing countries’ attempts to lure
multinational investment solely through tax and monetary subsidies were largely
ineffective. Instead, U.S. leaders should recognize all the factors that weigh
into business decision making and determine the right policy responses.
The role of multinational companies in US growth and competitiveness McKinsey Global Institute Director James Manyika discusses research showing the outsized contribution that US multinational corporations make to the country's economy—and how the United States has entered a new era of global competition for multinational investment and participation. Listen to the podcast
How to compete and grow: A sector guide to policy Drawing on industry case studies from around the world, MGI analyzes policies and regulations that have succeeded and those that have failed in fostering economic growth and competitiveness at the sector level. What emerges are some surprising findings that run counter to the way many policy makers are thinking about the task at hand. Read more
Sector-based policy insights on growth and competitiveness In this March 2010 podcast, MGI’s James Manyika and Jaana Remes offer insights from industries around the world on policies that have been successful as well as the industrial policy missteps of the past. Listen to the podcast
New horizons: Multinational company investment in developing economies A major study suggests that both multinational companies and developing economies could find enormous benefits through foreign direct investment. But global expansion has its pitfalls as well as its opportunities, and CEOs as well as policy leaders need to understand them both. Read more
U.S. productivity growth, 1995–2000 This study reveals the sources of the U.S. productivity miracle in the late '90s and the economy's future prospects. Much of the U.S. productivity acceleration was structural in nature and should endure. Read more
