DescriptionFirm-specific advantages (FSAs) play a critical role in the theory of the multinational firm. Firms establish foreign operations when their FSAs are not suitable to outsource or license in the market. However, the same assets deemed unsuitable for external contracting and licensing are extensively contracted and licensed within the multinational firm. The parent and/or subsidiaries that are the economic owners of the assets contract other entities within the firm to perform activities such as R&D, manufacturing, and distribution and pay them a guaranteed return for their activities. Internal ownership of FSAs has implications on the risks borne, incentives, resource allocation, and power distribution within the firm. Using a unique, confidential dataset on the internal transactions of multinational firms, including intra-firm product flows, economic ownership of FSAs, financials, and detailed specifications of the activities of subsidiaries within the firm, I examine the determinants of the structure of economic ownership of FSAs as well as the impact of FSA ownership on innovation within the multinational firm.