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Globalization and Multiproduct Firms

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  • Nocke, Volker
  • Yeaple, Stephen R

Abstract

We present an international trade model of multiproduct firms where firms differ in their endowment of managerial resources and in how effectively these resources can be used in making production more efficient. The model gives rise to a trade-off between conglomerate and specialization strategies of firms, yielding testable predictions on the relationship between firm size, scope and productivity. More efficient firms become exporters, but not all exporters are large and not all large firms export. Following a trade liberalization, non-exporters experience a fall in their market-to-book ratio and consolidate the number of products they manage to lower their marginal costs while the opposite holds for exporters.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 9037.

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Date of creation: Jul 2012
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Handle: RePEc:cpr:ceprdp:9037

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Keywords: diversification discount; firm heterogeneity; multiproduct firms; productivity; trade liberalization;

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  1. Andrew B. Bernard & Stephen J. Redding & Peter K. Schott, 2011. "Multiproduct Firms and Trade Liberalization," The Quarterly Journal of Economics, Oxford University Press, vol. 126(3), pages 1271-1318.
  2. Bernard, A., 1997. "Exceptional Exporter Performance: Cause, Effect, or Both?," Working papers 97-21, Massachusetts Institute of Technology (MIT), Department of Economics.
  3. Andrew B. Bernard & Stephen Redding & Peter K. Schott, 2010. "Multiple-product firms and product switching," LSE Research Online Documents on Economics 27861, London School of Economics and Political Science, LSE Library.
  4. Vojislav Maksimovic & Gordon Phillips, 2002. "Do Conglomerate Firms Allocate Resources Inefficiently Across Industries? Theory and Evidence," Journal of Finance, American Finance Association, vol. 57(2), pages 721-767, 04.
  5. Melitz, Marc J, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," CEPR Discussion Papers 3381, C.E.P.R. Discussion Papers.
  6. Hallak, Juan Carlos & Sivadasan, Jagadeesh, 2011. "Firms' Exporting Behavior under Quality Constraints," Working Papers 628, Research Seminar in International Economics, University of Michigan.
  7. Alla Lileeva & Daniel Trefler, 2007. "Improved Access to Foreign Markets Raises Plant-Level Productivity ... for Some Plants," NBER Working Papers 13297, National Bureau of Economic Research, Inc.
  8. Carsten Eckel & J. Peter Neary, 2010. "Multi-Product Firms and Flexible Manufacturing in the Global Economy," Review of Economic Studies, Oxford University Press, vol. 77(1), pages 188-217.
  9. Belén Villalonga, 2004. "Diversification Discount or Premium? New Evidence from the Business Information Tracking Series," Journal of Finance, American Finance Association, vol. 59(2), pages 479-506, 04.
  10. Eckel, Carsten & Neary, J. P., 2010. "Multi-product firms and flexible manufacturing in the global economy," Munich Reprints in Economics 20525, University of Munich, Department of Economics.
  11. Andrew B. Bernard & J. Bradford Jensen & Stephen Redding & Peter K. Schott, 2007. "Firms in International Trade," CEP Discussion Papers dp0795, Centre for Economic Performance, LSE.
  12. Andrew Atkeson & Patrick J. Kehoe, 2005. "Modeling and measuring organization capital," Staff Report 291, Federal Reserve Bank of Minneapolis.
  13. Sutton, John, 2012. "Competing in Capabilities: The Globalization Process," OUP Catalogue, Oxford University Press, number 9780199274536.
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