Internationalization And Profitability Of The U.S. Multinational Companies After The Free Trade Agreement

Abstract

This paper examines the effect of North American liberalization on the degree of internationalization and profitability of US companies using industry-level data between 1985 and 2005. We find evidence of long-run increases in the degree of internationalization and evidence pointing at increases in firm profitability in the short and long run for US companies following the introduction of NAFTA. We find cross-sectional variation in the degree of internationalization and profitability for US industry sectors. Overall, our results indicate that the process of liberalization has had a positive impact on both the degree of internationalization and on firm profitability for US companies.