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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.

Suggested Citation

  • Nocke, Volker & Yeaple, Stephen R, 2012. "Globalization and Multiproduct Firms," CEPR Discussion Papers 9037, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:9037
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    References listed on IDEAS

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    1. Bernard, Andrew B. & Bradford Jensen, J., 1999. "Exceptional exporter performance: cause, effect, or both?," Journal of International Economics, Elsevier, pages 1-25.
    2. Volker Nocke & Stephen Yeaple, 2008. "An Assignment Theory of Foreign Direct Investment," Review of Economic Studies, Oxford University Press, pages 529-557.
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    5. Costas Arkolakis & Marc-Andreas Muendler, 2010. "The Extensive Margin of Exporting Products: A Firm-level Analysis," CESifo Working Paper Series 3309, CESifo Group Munich.
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    1. repec:eee:reecon:v:71:y:2017:i:4:p:675-689 is not listed on IDEAS
    2. Eckel, Carsten & Iacovone, Leonardo & Javorcik, Beata & Neary, J. Peter, 2015. "Multi-product firms at home and away: Cost- versus quality-based competence," Journal of International Economics, Elsevier, pages 216-232.
    3. Larry Qiu & Miaojie Yu, 2014. "Multiproduct Firms, Export Product Scope, and Trade Liberalization: The Role of Managerial Efficiency," Working Papers 022014, Hong Kong Institute for Monetary Research.
    4. Tan, Yong, 2016. "The Impact of Demand Shocks on Firm-Level Offshoring Behavior: Theory and Evidence," MPRA Paper 73734, University Library of Munich, Germany.
    5. repec:eee:eecrev:v:94:y:2017:i:c:p:71-89 is not listed on IDEAS
    6. Eckel, Carsten & Iacovone, Leonardo & Javorcik, Beata & Neary, J. Peter, 2015. "Multi-product firms at home and away: Cost- versus quality-based competence," Journal of International Economics, Elsevier, pages 216-232.
    7. Eckel, Carsten & Irlacher, Michael, 2017. "Multi-product offshoring," European Economic Review, Elsevier, pages 71-89.
    8. Hu, Cui & Tan, Yong, 2017. "Learning to Import From Neighbors," MPRA Paper 78108, University Library of Munich, Germany.
    9. Tan, Yong & Han, Jian & Ma, Yeqing, 2015. "Multi-product firms, product scope, and the policy of export tax rebate," China Economic Review, Elsevier, vol. 35(C), pages 33-46.
    10. Juan de Lucio & Raúl Mínguez & Asier Minondo & Francisco Requena, 2016. "The variation of export prices across and within firms," Working Papers 1603, Department of Applied Economics II, Universidad de Valencia.
    11. Pablo D. Fajgelbaum, 2013. "Labor Market Frictions, Firm Growth, and International Trade," NBER Working Papers 19492, National Bureau of Economic Research, Inc.
    12. repec:eee:reecon:v:71:y:2017:i:4:p:645-649 is not listed on IDEAS
    13. Lopresti, John, 2016. "Multiproduct firms and product scope adjustment in trade," Journal of International Economics, Elsevier, pages 160-173.
    14. Tan, Yong & Shao, Yuchen, 2016. "The Impact of Demand Shocks on Firm-Level Offshoring Behavior: Theory and Evidence," MPRA Paper 68728, University Library of Munich, Germany.

    More about this item

    Keywords

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

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F15 - International Economics - - Trade - - - Economic Integration

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