Multinationals and Offshoring: Firm-Level Evidence from Canada

Abstract

Multinational enterprises (MNEs) have long been recognized as important pillars of Canada's national economy, accounting for the majority of its exports and an important share of its employment. At the same time, there is a widespread perception that MNEs are less rooted in the local economy and are thus more likely to conduct offshoring. In this study, we investigate the latter claim by combining various Canadian firm-level data sets. We find that MNEs (both Canadian and foreign headquartered) are indeed more likely to offshore but suggest that it is not necessarily because they are less rooted in the Canadian economy. We also show different associations between offshoring and firm characteristics (including productivity) depending on the type of offshoring (e.g., intrafirm or interfirm offshoring) and the type of business activity offshored (e.g., certain types of service vs. goods production).