This paper analyses the role and behaviour of multinationals in the Czech Republic. Using firm–level data (innovation survey waves 2001, 2003, 2006, and 2008) we applied a structural model that describes the link between innovation and productivity (CDM model). Multinationals are more hesitant than domestic firms when deciding about innovation. Those multinationals that decided to innovate invested more per employee than domestic firms; their labour productivity advantage is rather ambiguous. The next analysis focused on productivity, wages and market concentration in the sample of firms representing not only innovators, but the whole Czech economy (1997–2010). On average, multinationals are more productive, pay higher wages and have no impact on market concentration. However, in a detailed view, multinationals increased market concentration in the first period (1997–2003) and had significantly lower productivity in the years of economic crisis. These results suggest a close relationship between the multinationals behaviour and economic fluctuations. A long term and short term relationship between FDI and real GDP was observed.