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Multinationals, Technology, and the Introduction of Varieties of Goods

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Irene Brambilla

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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 percent 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 percent of the difference in the number and sales of new varieties, while advantages in the cost of development account for 3 to 6 percent of these differences.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12217.

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Date of creation: May 2006
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Handle: RePEc:nbr:nberwo:12217

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Find related papers by JEL classification:
F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
F14 - International Economics - - Trade - - - Country and Industry Studies of Trade

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References listed on IDEAS
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  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). [Downloadable!]
  2. 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). [Downloadable!]
  3. Deborah L. Swenson, 2007. "Multinationals and the Creation of Chinese Trade Linkages," NBER Working Papers 13271, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Kolasa, Marcin, 2007. "How does FDI inflow affect productivity of domestic firms? The role of horizontal and vertical spillovers, absorptive capacity and competition," MPRA Paper 8673, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  5. 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. [Downloadable!] (restricted)
  6. Ralf Ruhwedel & Michael Funke, 2008. "Trade, product variety and welfare: a quantitative assessment for mainland China," Quantitative Macroeconomics Working Papers 20806, Hamburg University, Department of Economics. [Downloadable!]
  7. Itai Agur, 2006. "Firm Heterogeneity and the Two Sources of Gains from Trade," Economics Working Papers ECO2006/38, European University Institute. [Downloadable!]
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