Learning the Ropes? Executive Experience and Location Choices of Multinational Firms

What makes firms invest in foreign countries? This paper shows that beyond country- and firm-specific characteristics, executive experience is crucial to understand multinational enterprises' location choices. Using data on US-listed firms and an event study, I find that hiring an executive having multinational experience with a given country increases the firm's probability to own subsidiaries in this country. The effect also holds at the intensive margin. Moreover, only country-specific experience is determinant, top C-level executives such as chief executive officers drive the results, and experience in managing multinational activities commands a compensation premium. A series of robustness checks corroborate these observations. Overall, the findings reveal that executives develop country-specific knowledge while working for multinationals, a valuable asset in the labor market, and significantly help companies expand abroad