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Multinationals, technology, and the introduction of varieties of goods

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  • Brambilla, Irene

Abstract

Multiproduct firms and product turnover are widespread phenomena. This paper develops a theoretical framework that links advantages in R&D and variable costs with firm's ability to expand its portfolio of products. The framework is then applied to explain systematic differences in product introduction by affiliates of multinationals and firms that only operate domestically. Using firm-level data for the Chinese manufacturing sector during 1998-2000, I compare the performance of foreign and domestic firms in terms of the new varieties that they introduce and I estimate the quantitative relevance of technological factors as a determinant. I find that firms with more than 50% of foreign ownership introduce on average more than twice as many more new varieties of goods as private domestic firms. Advantages in productivity account for 32 to 62% of the difference in the number and sales of new varieties, while advantages in the cost of development account for 3 to 6% of these differences.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Economics.

Volume (Year): 79 (2009)
Issue (Month): 1 (September)
Pages: 89-101

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Handle: RePEc:eee:inecon:v:79:y:2009:i:1:p:89-101

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Web page: http://www.elsevier.com/locate/inca/505552

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Keywords: Foreign direct investment Multiproduct firms Firm heterogeneity China;

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References

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Citations

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Cited by:
  1. Machikita, Tomohiro & Ueki, Yasushi, 2009. "Linked versus Non-linked Firms in Innovation: The Effects of Economies of Network in Agglomeration in East Asia," IDE Discussion Papers 188, Institute of Developing Economies, Japan External Trade Organization(JETRO).
  2. Deborah L. Swenson, 2008. "Multinationals and the creation of Chinese trade linkages," Canadian Journal of Economics, Canadian Economics Association, vol. 41(2), pages 596-618, May.
  3. Oliver Lorz & Matthias Wrede, 2009. "Trade and Variety in a Model of Endogenous Product Differentiation," MAGKS Papers on Economics 200902, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  4. Ling Feng & Zhiyuan Li & Deborah L. Swenson, 2012. "The Connection between Imported Intermediate Inputs and Exports: Evidence from Chinese Firms," IAW Discussion Papers 86, Institut für Angewandte Wirtschaftsforschung (IAW).
  5. Kolasa Marcin, 2008. "How does FDI inflow affect productivity of domestic firms? The role of horizontal and vertical spillovers, absorptive capacity and competition," Journal of International Trade & Economic Development, Taylor and Francis Journals, vol. 17(1), pages 155-173.
  6. Pinelopi K. Goldberg & Amit Khandelwal & Nina Pavcnik & Petia Topalova, 2008. "Imported Intermediate Inputs and Domestic Product Growth: Evidence from India," NBER Working Papers 14416, National Bureau of Economic Research, Inc.
  7. Mitsuo Inada, 2013. "The Effects of Foreign Direct Investment on Industrial Growth: Evidence from a Regulation Change in China," KIER Working Papers 856, Kyoto University, Institute of Economic Research.
  8. Bruce A. Blonigen & Alyson C. Ma, 2010. "Please Pass the Catch-Up: The Relative Performance of Chinese and Foreign Firms in Chinese Exports," NBER Chapters, in: China's Growing Role in World Trade, pages 475-509 National Bureau of Economic Research, Inc.
  9. Itai Agur, 2006. "Firm Heterogeneity and the Two Sources of Gains from Trade," Economics Working Papers ECO2006/38, European University Institute.
  10. Sheng, Liugang & Yang, Dennis Tao, 2011. "Speeding Up the Product Cycle: The Role of Host Country Reforms," IZA Discussion Papers 6054, Institute for the Study of Labor (IZA).
  11. Pittman, Russell, 2011. "Risk-averse restructuring of freight railways in China," Utilities Policy, Elsevier, vol. 19(3), pages 152-160.
  12. Hayakawa, Kazunobu & Tsubota, Kenmei, 2011. "Location choice in low-income countries : evidence from Japanese investments in East Asia," IDE Discussion Papers 301, Institute of Developing Economies, Japan External Trade Organization(JETRO).
  13. Roger Smeets & Harold Creusen, 2011. "Fixed export costs and multi-product firms," CPB Discussion Paper 188, CPB Netherlands Bureau for Economic Policy Analysis.

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