Description
The Limits to Institutional Arbitrage: Resource Fungibility -- External Agglomeration and Regional Collocation
We analyze the persistence of institutional arbitrage investments by multinational corporations (MNCs) following a policy change that reduces the institutional benefits from operating abroad. Our core argument is that the decision to relocate activities after a policy change will vary by the fungibility of the activity, the agglomeration benefits of the country and the extent of a firm’s internal regional collocation. Results from difference in differences analyses of changes in US MNC investments in tax haven countries following the Tax Cuts and Jobs Act show that the effects of this policy change were limited to more fungible investments (cash) in countries with low agglomeration benefits; less fungible investments (R&D, employees, product and service transfers) and investments in countries with agglomeration benefits were unaffected.
Featuring: Dr. Heather Berry, Dean's Professor of Strategy and International Business - Georgetown University
Location
BB 1.02.20D
Category:
Academics
