Abstract

A decision to change the way American firms are taxed on the profits from their foreign operations must involve some judgment as to the desirability of increasing or decreasing the extent of U.S. firms ’ foreign operations. This paper reviews past research on the effects of the overseas operations of U.S. firms on the U.S. economy. Four main topics are discussed here: 1. The growth and decline of U.S. firms ’ internationalized production 2. Overseas production and export market shares in manufacturing 3. Does, foreign production substitute for home-country exports? 4. Foreign production and home-country labor 1.1 The Growth and Decline of U.S. Firms ’ Internationalized Production’ The establishment of foreign operations by American firms, and the estab-lishment by any country’s firms of production, including sales and service ac-tivities, outside the home country, is often referred to as the internationalization