Abstract/Summary

We examine key factors which affect intangible asset holdings of foreign subsidiaries of multinational enterprises (MNEs). We develop our hypotheses by drawing upon the pecking order theory in the finance literature and the institution theory. We theorise that MNE foreign subsidiaries combine and utilize their cash holdings (finance-based firm-specific advantages - FSAs) with host country economic freedom (host country-specific advantages - CSAs) in their holdings of intangible assets which are internally created and/or purchased. We empirically test our hypotheses using a new original dataset of European subsidiaries of U.S. MNEs. We find that cash holdings and host country economic freedom share a significant and positive relationship with intangible asset holdings. We discuss the implications of our findings for theory and practice.