Production workers receive an average of 6.9 percent less at comparable domestic plants employing more than 500 employees and 15.2 percent less at comparable domestic plants employing fewer than 500 employees. Non-production workers receive an average of 5.0 percent less at comparable domestic plants employing more than 500 employees and 9.5 percent less at comparable domestic plants employing fewer than 500 employees. These results control for possible wage differences attributable to variations across plants in age, industry, location, and size. In light of all these controls, it seems likely that these wage differences are attributable to workers at U.S. parents being more productive than workers at comparable domestic plants. In addition to directly raising the U.S. standard of living themselves, American companies with global operations may also raise the U.S. standard of living through their interactions with domestic U.S. suppliers.
Evidence exists that companies benefit from being exposed to other dynamic, successful firms.
Exposure to worldwide best practices whether those best practices are in the same country or abroad tends to foster innovation, cost control, and other improvements that boost firm productivity. The very large amount of purchases of intermediate inputs from domestic suppliers by U.S. parents of American companies with global operations suggests the possibility that U.S. domestic suppliers have sufficient exposure to these high-productivity parents to realize some productivity gains. Because the U.S. and foreign activities of American companies with global operations tend to complement each other, the ability of these companies to raise the U.S. standard of living depends crucially upon their ability to undertake FDI abroad. Analysis of BEA data, academic research, and case studies of 10 major American companies demonstrates that U.S. FDI generally complements rather than substitutes for U.S. parent activity. Within American companies with global operations, affiliate expansion generally triggers in U.S. parents additional investment, research and development, trade, and input purchases from domestic suppliers.