Why Did US Firms Change Since the Early-2000s? The Mass-Multinationalization Implication of Aggregate Fluctuation

Multiple dimensional shifts related to firm-level multinationalization spill over to the aggregate realm as an unusually large mass of US firms multinationalized in the late-1990s. Firms become considerably different in many aspects as they transform into multinational enterprises (MNEs), providing a firm-dynamics foundation for the otherwise secular aggregate fluctuations. The mass-multinationalization hypothesis jointly explains a series of recently raised macro-finance puzzles, including (1) decreasing investment relative to q and profitability, (2) increasing intangible investment, (3) increasing concentration, (4) decreasing labor and capital shares, and (5) market power. The mass-multinationalization looks to be triggered by an increasing incentive of integrating foreign value chains to sell US products and services. The mass-multinationalization hypothesis is a novel, straightforward, and action-based mechanism explaining the joint secular movements, and it does not depend on proposed alternative explanations