Multinational price premium

By exploring a rich data set that links international trade transactions to panel data of manufacturing firms from China during 2000-2006, we reveal new patterns of export prices across firms. We find that foreign firms charge about 28% higher prices than Chinese exporters after controls for firm productivity and product-destination-year fixed effects. We provide evidence that the multinational price premium is significantly correlated with the knowledge-based intangible assets within multinationals. The multinational price premium is substantially higher for firms with headquarters in more innovative countries and for firms that have technicians and managers sent from their parent companies. The price premium is even higher for majority- or wholly owned affiliates than for minority-owned affiliates. Our results imply that in addition to generating efficiency gains, multinationals can also enhance the capability of foreign affiliates to produce quality.