A comparison of the average employment of foreign affiliates and firms under national control shows that foreign affiliates are significantly larger than national firms. This is true for all countries.

In addition to being larger on average than firms under national control, foreign affiliates also display higher levels of (apparent) labour productivity. Without exception, foreign affiliates have higher productivity than firms under national control. The differences between the two types of firms are especially large in Ireland and Hungary.

In all countries for which data are available, average compensation per employee is higher for foreigncontrolled affiliates than for national firms both in manufacturing and services industries. Average wages are higher in the manufacturing sector than in the services sector.

The share of gross operating surplus (profit) in the turnover of foreign-controlled affiliates could be used as one indicator of the profitability of foreign-owned investments in host countries. However, comparisons of the profitability of foreign affiliates should be interpreted with care, given differences in regulatory environments, tax rules, etc., in different countries. Previous research has shown the importance of transfer pricing in the observed profitability of affiliates of multinational companies in different countries.

Affiliates under foreign control engage not only in serving local markets in the host country but often also serve other (neighbouring) markets. In addition, they produce inputs for other affiliates in the multinational network. This intra-firm trade involves the export and import of nearly finished goods destined for affiliate firms that are mainly involved in marketing and distribution but engage in little additional manufacturing processing.

Since part of foreign affiliates’ production is used as intermediate inputs by parent firms and other affiliates within the multinational network, intra-firm trade has taken on greater importance. Over 2000-07, the share of intra-firm exports in total exports of manufacturing affiliates under foreign control ranged between 15% and 50% in several of the countries for which relevant data are available.

Data for 2007 show that the deficit on the US trade balance was mainly the result of the activities of firms under national control. Affiliates under foreign control in the manufacturing sector only contributed 13% to the global trade deficit of the United States compared to 87% for firms under US control.

The share of foreign affiliates amounted to about 7% of exports from Japan and 13% of imports to Japan. Thus, trade of foreign affiliates in Japan seemed to play a rather limited role in Japan’s international trade.