Business in Troubled Waters: Does Adverse Attitude Affect Firm Value?

Abstract

This paper investigates the relationship between US MNCs’ valuations and anti-Americanism in countries where MNCs’ foreign subsidiaries are located. We find that MNCs suffer value-destruction when they enter markets where people express severe anti-Americanism. However, we uncover that geographic diversification into these high anti-Americanism countries significantly increases firm value if the MNC has high levels of intangibles such as technological know-how and marketing expertise. Our findings are consistent with the notion that the advantages from internalizing the cross-border transfer of intangibles are greater when barriers to competition are higher.

Keywords: Global Attitudes, Intangible Assets, Internalization, Multinational Corporation, Geographic Diversification

JEL Classification: F50, F23, G30