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As American as Apple Inc.

It might well be true that "what's good for American business is good for America." But the question is: when is a business American?

Certainly, the nationality of employees is an important element. But if the nationality of owners is also part of the picture — and it should be — that picture is a good deal harder to discern than most people realize.


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Take the list of the largest US-incorporated multinationals. These are some of the most American-sounding companies one can imagine: companies like Google, Cisco, Pfizer, GE, and Apple. But the truth is, nobody — not Wall Street, not the IRS, not even the companies themselves — really knows the extent to which these companies are foreign owned.

Let's be clear: Foreign ownership itself is not the problem. Neither is the fact that foreign ownership share is an unknown.

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The problem is that for most of the American public, shareholder nationality is — as Donald Rumsfeld might say — an unknown unknown. And lobbyists are all too ready to exploit the gap in self-awareness. The unspoken, unjustified presumption that companies with American-sounding names are largely American-owned allows large U.S. multinationals to play the patriotic card with far more gusto that the facts can really bear.

"Help us compete in the world marketplace" is the often-heard appeal when these companies defend their use of offshore tax havens. "Let us bring our foreign earnings home so we can stimulate the economy," they implore, when arguing for a reduction in the "repatriation" tax on foreign profits.

But just who is this "us?" And where is this "home?"

Any serious investigation of ownership nationality begins with the economic research on "home country bias." This well known academic literature documents — and attempts to explain — the phenomenon that individuals tend to overinvest in home country stocks relative to foreign country stocks. The implication is that foreign investors are underinvesting in U.S. stocks, while U.S. investors overinvesting in U.S. stocks, with the end result that U.S. stocks are predominantly U.S. owned.

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But the home-bias literature provides evidence only for U.S. companies in general. It contains no findings specially targeted to large U.S. multinationals — the ones making arguments about global competitiveness and repatriation barriers. The empirical evidence presented in the home bias literature simply doesn't separate out large U.S. multinationals from other kinds of U.S. companies.

Can't we interpolate? When large U.S. multinationals cite the home bias literature in defense of their patriotic stance they are implicitly asking us to do this. But, ironically, the home bias literature itself warns against it. Among contributors to that body of research, the most well accepted explanations for the observed general bias toward home country stocks are that 1) it is a rational response to relative lack of information about foreign companies and that 2) it is an irrational bias connected to feelings of "unfamiliarity."

But where in the world do investors not know about, or feel familiar with, Apple, Cisco, and Google? After all, if a French citizen wanted to learn about home country bias, she might well Google it on her iPhone. There's a reason we call these companies "multinational."

The next step, of course, is try to step through the home-bias literature to the raw data and do the breakout from scratch. But it turns out, there's a reason the home-bias literature hasn't done this yet itself: The data don't exist.

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The U.S. has several overlapping reporting regimes regarding equity ownership in U.S. companies. These include the Treasury International Capital (TIC) system used in compiling the balance of payments, reporting to the IRS in connection with the tax paid by foreign investors on U.S. company dividends, and three separate regimes administered by the SEC (reporting by "institutional investment managers" on Form 13F, by "registered management investment companies" (mutual funds) on Forms N-Q and N-CSR, and by "registered investment advisers" on Forms ADV and PF).

Several of these reporting regimes are ingeniously designed, given their objective. Some require surprisingly detailed responses. But all of them were structured for purposes other than determining the foreign ownership of the particular subclass of large U.S. multinationals. And none of them supply this information serendipitously.

Nothing should prevent large U.S. multinationals from making the "what's good for us is good for America" argument. The question is whether, in making such arguments, these companies should get priority boarding at the Capitol, or whether they should get in line with Toyota and Siemens. Certainly, the bare fact that "U.S. companies" file their corporate documents in Delaware rather than Düsseldorf shouldn't matter. And if we've been waving them up to the gate on the assumption that their owners are largely American, we might want to take a closer look at their boarding passes.

Chris William Sanchirico is a professor of law, business, and public policy at the University of Pennsylvania Law School and the Wharton School. He is also a faculty affiliate of the Penn Wharton Public Policy Initiative. Follow Penn Wharton PPI on Twitter @PennWhartonPPI.